What Is a Subledger, and Why Is It Important?

Subledgers are part of your general ledger and provide detail on specific high-activity accounts. Learn more about subledgers and why they’re important for your small business.

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A subledger or subsidiary ledger provides the details that make up the balance of specific general ledger accounts. Because general ledger accounts only provide an ending balance for each particular account, a subsidiary ledger is used to provide the details that result in that general ledger balance. Only high-activity accounts in your general ledger will use a subledger.


Overview: What is a subledger?

Imagine looking at your general ledger and seeing that you currently owe $4,500 to your vendors, but having no idea how much you owe to each particular vendor. The same issue can also impact your accounts receivable balance. Although your general ledger balance informs you that your customers currently owe $10,000, how can you collect those funds and follow up on late payments if you don’t know which customers owe how much?

That’s why subsidiary journals are so important. They provide the details for high-activity general ledger accounts, making it easy to pay your bills and collect balances from customers. Subsidiary ledger accounts are commonplace for general ledger master accounts such as cash, accounts payable, accounts receivable, and sales. Subledger examples include the following:

  • Customer accounts
  • Vendor accounts
  • Bank accounts
  • Sales accounts
  • Fixed asset accounts

If your business is very small, and you only have one or two vendors or customers, you can easily track your balances in your general ledger. But once vendor or customer activity increases, you’ll need a way to track the individual transactions that make up the balance of those general ledger accounts. Only subledger accounting will do that.

If you’re using accounting software to manage your business finances, your software will automatically create subledger accounts for you, eliminating the need to track these transactions separately. Accounting software will render the subledger vs. general ledger issue irrelevant.


3 differences between a general ledger and a subledger

Though designed to function together, there are quite a few differences between a general ledger and a subledger. The following are some of the more important ones.

1. The general ledger is part of your chart of accounts

Your general ledger serves as your chart of accounts, while your subledger is the information that feeds into your general ledger but does not have its own chart of accounts. In other words, the general ledger can function just fine without subledgers, but a subledger requires a general ledger to function properly.

2. General ledgers and subledgers have different numbers of accounts

Your general ledger account contains only one specific account for each category, while a subledger can have an unlimited number of account transactions.

For example, your general ledger has only one accounts payable account, whereas your subledger can have an unlimited number of sub-account transactions that make up the total of your accounts payable account.

3. General ledger accounts provide summaries, while subledger accounts provide details

Your general ledger is designed to provide the balance of each of the accounts in your chart of accounts, while the subledger is designed to provide you with the details that make up that particular account.

General Ledger Subledger
Considered master accounts where all transactions and balances are recorded Used to record the details of general ledger account it’s linked to
Examples of accounts include banking, accounts receivable, accounts payable, sales, and fixed assets Examples of accounts include bank transactions, customer accounts, sales accounts, vendor accounts, and fixed asset transactions
Transaction information varies from account to account Each group of transactions shares similar characteristics
There is only one account for each category There are often several accounts for each of its corresponding general ledger accounts
Contains only summary information Contains detailed information about each transaction
Does not have a balancing requirement Must total the amount displayed in the appropriate general ledger account

This table details the significant differences between a general ledger and a subledger.


Best practices when using a subledger

If you’re still using a manual accounting system, there are some things you’ll need to pay close attention to when using a subledger.

Make sure the balances match

The transaction total in your subsidiary ledger account should always match the total in your general ledger. For example, if you have multiple accounts receivable subledger accounts that currently equal $15,000, your accounts receivable balance in your general ledger should also be $15,000. If the balances do not match, you should reconcile the account to determine the reason for the difference.

General Ledger Account as of 12-31-2020 Debit Credit
Accounts Receivable $15,000

Accounts Receivable Subledger as of 12-31-2020

Date Customer Debit Credit Balance
12-10-2020 J. Smith $  1,200 $  1,200
12-15-2020 M. Jones $  4,000 $  5,200
12-18-2020 W. Brown $  5,000 $10,200
12-19-2020 C. Johnson $  1,800 $12,000
12-22-2020 S. Smith $  3,000 $15,000
12-23-2020 W. Brown $5,000 $10,000
12-27-2020 J. Johnson $  5,000 $  5,000
12-31-2020 Total $20,000 $5,000 $15,000

Your accounts receivable general ledger has a balance of $15,000 at the close of 2020, matching your accounts receivable subledger, which includes seven distinct customer balances.

Make sure to complete your closing entries after reconciliation

After you have reconciled all of your subledger accounts, be sure that you properly complete the accounting cycle by entering any closing entries or adjusting entries you may have, including any missing transactions. You may also need to reverse any erroneous duplicate entries.

Consider switching to an automated accounting system

If you’re tired of maintaining subledgers for your high-volume general ledger accounts, consider making the switch to accounting software. Using an accounting software application will track your subledger totals and automatically transfer the total of those transactions to your general ledger, eliminating the need to manually track them.

Using accounting software also eliminates the need to roll subledger account totals up into your general ledger at month-end. Additionally, it automates the entire journal entry process, so the only month-end entries you’ll need to complete are adjusting entries for interest, depreciation, and amortization.


Subledgers are an important part of the accounting process

While the general ledger is the backbone of your double-entry accounting system, subledgers play an important role as well, detailing the transactions that make up your general ledger balances.

The use of accounting software can simplify the process of maintaining multiple subledger accounts, eliminating the need to record multiple transactions manually. It can also reduce the amount of time you need to spend on researching and reconciling out-of-balance accounts.

But whether you record your subledger accounts automatically or manually, they are a necessity for managing your small business accounting properly, so be sure they’re done right.

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