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Subledger vs General Ledger

What Is the General Ledger?

A general ledger compiles a record of all financial transactions that occur over a period of time for a company. It is the master ledger used to produce accounting records, especially financial statements such as the balance sheet, income statement, and statement of cash flows.

All businesses use a book or similar collection of records to record and track the various transactions that occur during their business operations. The book, or ledger, enables a business to maintain accurate records of its transactions so that it can monitor, report, and examine its overall financial health.

The general ledger follows the double-entry system of accounting. According to this accounting system, every transaction is represented by a journal entry in at least two different locations. Under the double-entry system, journal entries will always have a debit and a credit in the ledgers where they are recorded. The two entries will always balance out, in other words, equal zero.

The general ledger allows accountants and business managers to make informed analyses about financial activities by arranging transactions according to different aspects of the business. These aspects are broken down into one of five broad categories:

  1. Assets

  2. Liabilities

  3. Equity

  4. Expenses

  5. Income or revenue

What Is a Subledger?

A subledger is a record of transactions related to a specific financial account, such as accounts receivable or inventory. Subledgers are used to organize various transactions for detailed analysis and reporting.

Organizations will have multiple subledgers depending on the number of accounts and entities that exist within the organization.

Transactions are broken down into separate accounts based on the nature of their financial activity. The detailed accounting of these specific transactions is referred to as a subsidiary ledger or subledger.

All transactions in a subledger share one or more common characteristic. For example, the asset category may include subledgers for the cash account, accounts receivable, inventory, investments, and fixed assets.

The income or revenue category might include subledgers for sales, rental income, and interest income. Liabilities would include accounts payable, mortgages, taxes, and accrued expenses.

What Is a Financial Transaction?

A financial transaction is any exchange or interaction of a monetary value that impacts a business.

Why Use a Subledger?

Subledgers are used to help accountants and managers maintain detailed records of financial transactions for the business. This ensures greater accuracy, and it supports a thorough analysis or audit.

The general ledger is a master document that contains summaries or line items of financial activity organized by accounts, as reported in the subledgers. Because it is the master accounting document for the business, if the general ledger contained detailed transaction data for every transaction in the business, it would be difficult to analyze and report on specific categories of transactions.

The subledger allows the business to maintain detailed transactional information without diminishing the functionality of the general ledger. Organized according to particular accounts, subledgers do not contain information for the entire business. This frees the general ledger from the burden of containing too much information, while still preserving the ability to perform analysis of a particular aspect, or account, within the business.

How Is a Subledger Information Posted to the General Ledger?

Information contained in a subledger is typically totaled and summarized in a control account within the general ledger. The control account reflects the activity that is recorded in the subledger without all the detail. This maintains the organizational account structure of the chart of accounts but frees the general ledger of unnecessary details. For example, a subledger for accounts receivable will contain detailed journal entries with date, purchase price, customer name, and cost of goods sold for each transaction. In contrast, the general ledger entry in the control account would represent only a total and summary of multiple similar entries within the subledger.

What Are the Benefits of the Subledger?

The use of subledgers benefits businesses in several ways. As businesses expand, the accounting process becomes more demanding and complex. Not all transactions can be efficiently recorded—nor do they need to be—in the general ledger. Subsidiary ledgers facilitate the accounting process by segmenting or compartmentalizing the recording of transactional information. This keeps the general ledger clean and workable, without compromising the need for accuracy by maintaining detailed recording of all financial information.

Subledgers are linked to the general ledger, but because not all information in the subledger is recorded there, the general ledger does not become cluttered.

This also allows for a more functional general ledger. The general ledger is used to produce other documents that support the analyses that accountants and business managers perform. For example, accountants use the general ledger to prepare a trial balance to make sure that all debits and credits balance out. This process helps accountants identify errors, unusual transactions, and fraud, and it provides an opportunity to make corrections.

The general ledger is used to produce financial statements, like the income statement and the balance sheet, which provides detailed information for accountants, managers, and investors to make informed decisions about the business and its performance.

The detailed information that is contained in subledgers is not needed in these important reports, and only their summaries or line items are included.  

Subledgers are also important for businesses and enterprises that have varied financial activity. For example, a business that relies on multiple sources of revenue, such as leases, sales, interest, rental income, and investments, can create subledgers for each type of account.

Subledgers also help businesses perform accurate audits of their financial activities. Working off the detailed information reported there, a business can drill down into a particular type of financial activity and perform an appropriate analysis or reconciliation.

Subledgers help larger businesses protect sensitive information that not all employees need to see. By segregating information and keeping it out of the general ledger, subledgers offer a layer of privacy and protection to certain details in accounts, such as payroll.

What Are the Main Differences Between the General Ledger and a Subledger?

While the general ledger is a master account document containing an overview or summary of financial information for the entire business, subledgers contain detailed information for certain, specific types of financial activity, organized by accounts.

General ledgers and subledgers have several important distinctions:

General Ledger:

  • The General Ledger is a master document that contains financial information for the entire business

  • The General Ledger contains line items summaries or totals from specific accounts in the Subledgers

  • The General Ledger contains transaction summaries across different account categories

  • The General Ledger contains a limited amount of data that is summarized in line items.


  • Subledgers record transactional information only for specific types of financial activity, or accounts.

  • Subledgers contain detailed information for each transaction in an account.

  • Subledgers contain information about transactions that share one or more common characteristics.

  • Subledgers contain a higher volume of information and data.


Which Comes First, General Ledger or Subledger?

Transaction data is first recorded in the subledger.

The accumulation of transaction data is totaled there, then summarized in a line item within the general ledger.

For example, a business with multiple bank accounts will record the data from these accounts in a subledger. Each bank account and its corresponding transactions will be itemized there.

This financial activity will be totaled and reported in a control account within the general ledger, labeled "bank accounts" or "bank management."

How Do I Reconcile a Subledger to the General Ledger?

Reconciling subledgers with the general ledger would be performed in the same manner that all other transactions are reconciled. Account reconciliation refers to the process in which information in an account is confirmed to be correct and accurate.

Reconciliation is performed by comparing two different references to the same financial transactions.

To reconcile entries in the general ledger and a subledger, accountants will identify the difference and determine the source of the discrepancy. This may involve drilling down into the subledger or one or more transactions within it. Adjustments will ultimately have to be made to the subledger, general ledger, or both.

What Are Some Examples of Subledgers?

Subledgers can be recorded for a variety of activities that affect a business and which can be organized by common characteristics. For example, accounts receivable (AR) are recorded as a subledger. AR is a broad term that refers to all sales for which payment has not yet been received. AR is typically organized as a subledger within the broad general ledger category of assets because it is expected revenue owed to the business.

Vendor accounts represent another common example of subledger accounting. This is where a business would record all financial transactions involving vendors that supply it with materials and services, and for which payment is owed. This typically falls under accounts payable.

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