A subsidiary ledger breaks down an account into workable pieces.
Subsidiary ledgers are usually kept for accounts payable and accounts receivable. John’s accounts receivable are $4000. The subsidiary ledger shows that the $4000 consists of $500 owed by A Company and $1000 owed by B Company, $800 owed by C Company, $500 owed by D Company, $1000 owed by E Company, and $200 owed by F Company. In this case, the subsidiary ledger consists of separate accounts for each of the six customers. It is much easier for John to see if any of his customers is getting behind on their payments if the accounts are separate and not lumped together as $4000.
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