A subsidiary ledger provides detailed breakdowns of a general ledger account. The accounts receivable subsidiary ledger shows individual customer balances; the AP subsidiary ledger shows supplier balances.
Subsidiary ledgers support the general ledger by providing granular detail that would be impractical to maintain in the GL itself. The general ledger shows total accounts receivable as a single balance; the subsidiary ledger breaks this down by individual customer, showing every invoice, payment and credit note for each customer. Similarly, the accounts payable subsidiary ledger shows details for each supplier, the inventory subsidiary ledger tracks individual products and the fixed asset subsidiary ledger records each asset. The total of all balances in a subsidiary ledger must equal the corresponding general ledger account balance - if they do not match, there is a reconciliation error that needs investigation. In Xero, subsidiary ledger functionality is built into the system through the Contacts module (tracking individual customer and supplier balances) and the Fixed Assets module. SortBooks maintains subsidiary ledger accuracy by correctly allocating every transaction to the right customer, supplier or account.
SortBooks helps with the bookkeeping behind subsidiary ledger by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing subsidiary ledger by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The general ledger is the master record of all financial transactions in a business, organised by account. It forms the basis for preparing financial statements.
Accounts receivable (AR) is the money owed to your business by customers who have purchased goods or services on credit. It is a current asset on your balance sheet.
Accounts payable (AP) represents the money your business owes to suppliers and vendors for goods or services received but not yet paid for. It is a current liability on your balance sheet.
Reconciliation is the process of comparing two sets of records to ensure they agree. Common types include bank reconciliation, accounts receivable reconciliation and intercompany reconciliation.
A ledger is a book or digital record containing accounts where transactions are classified. The general ledger contains all accounts; subsidiary ledgers provide detail for specific accounts.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.