Accounts Payable Subsidiary Ledger

What Is an Accounts Payable Subsidiary Ledger?

An accounts payable subsidiary ledger is an accounting ledger that shows the transaction history and amounts owed to every provider and vendor. A accounts payable (AP) is basically an extension of credit from a provider that gives a business (the buyer in the transaction) time to pay for the supplies. The subsidiary ledger records every one of the accounts payables that a company owes. The payment terms are regularly 30, 60, or 90 days.

The balance in the customer accounts is occasionally accommodated with the accounts payable balance in the overall ledger to guarantee exactness. The accounts payable subsidiary ledger is likewise regularly alluded to as the AP sub-ledger or subaccount.

Grasping an Accounts Payable Subsidiary Ledger

Companies can have different payables owed to vendors or providers at some random time. These payables are short-term obligations or IOUs starting with one company then onto the next company. The total amount of payables owed to providers is recorded as accounts payable on the overall ledger.

The overall ledger is a master ledger containing a summary of the relative multitude of accounts that a company involves in operating its business. The subsidiary ledgers roll up to the overall ledger, which records the aggregate totals of the subsidiary ledgers. The overall ledger, thusly, designates these totals into assets, liabilities, and equity accounts. Inside most accounting systems, the cycle is performed through accounting software.

At the point when the financial statements are prepared, the accounts payable total is listed with other short-term financial obligations under the current liabilities section of the balance sheet. The accounts payable subsidiary ledger is a breakdown of the total amount of payables listed on the overall ledger. All in all, the subsidiary ledger contains the individual payables owed to every one of the providers and vendors, as well as the amounts owed.

Since companies can have various orders with similar vendor and a wide range of vendors, the accounts payable subsidiary ledger monitors what's owed without making various accounting sections on the overall ledger. The subsidiary ledger is basically a worksheet for every one of the payables owed to providers.

The accounts payable subsidiary ledger is useful in giving internal accounting controls. The accounts payable subsidiary ledger amounts can be crosschecked with the aggregate amount reported on the overall ledger to forestall errors in reporting. Management can likewise check to guarantee that each invoice from the vendors and providers are being recorded.

Illustration of an Accounts Payable Subsidiary Ledger

For instance, suppose The Ford Motor Company has an overall ledger balance that shows a total accounts payable balance of $106 million. Be that as it may, management needs to see which providers are owed and the amounts owed.

The data required can be gathered from the accounts payable subsidiary ledger. The subsidiary ledger shows the accompanying:

Provider An is owed $2 million for tires.
Provider B is owed $6 million for vehicle mats.
Provider C is owed $98 million for steel.

The accounts payable subsidiary ledger is like other subsidiary ledgers in that it only gives subtleties of the control account in the overall ledger. Other subsidiary account ledgers incorporate the accounts receivable subsidiary ledger, the inventory subsidiary ledger, and the equipment subsidiary ledger.

Features

The subsidiary ledger records every one of the accounts payables that a company owes by which the aggregate total is carried over to the overall ledger.
An accounts payable subsidiary ledger is an accounting ledger that shows the transaction history and amounts owed to every provider and vendor.
An accounts payable (AP) is basically an extension of credit from a provider that gives a business (the buyer) time to pay for the supplies.