Question

Because companies often buy on credit from several suppliers, this means that they must keep a separate account for each supplier. To do this companies will keep an Accounts Payable controlling account in the general ledger and a separate account for each individual supplier in an accounts payable subsidiary ledger.True or False

Answer 1

Answer:

True

Explanation:

Accounts payable account is a record of the details of outstanding purchase balances that are due to a supplier at a particular date. This is used to keep track and monitor the flow of supply made by a supplier and also the payment disbursed with the outstanding balances noted.

In order to achieve this , an organisation employs the use of accounts payable controlling account in the general ledger and separate account for each supplier in the accounts payable subsidiary ledger.

The payable controlling account summarizes the accounts in the subsidiary individual suppliers accounts payable.

Answer 2

Answer:

true

Explanation:

A subsidiary ledger is used to record specific transactions regarding each customer (for accounts receivable) or each vendor (for accounts payable). Subsidiary ledgers are used to keep detailed records while not messing with a general ledger account (or control account). Imagine a large company that must sell or buy on credit with hundreds of customers and dozens of vendors, the mess that their general ledger accounts would be.

Now it is much more simple, with any accounting software you just use codes, but these procedures are based on manual records. Only the balance account of each subsidiary ledger is introduced into the general ledger. ERP software like SAP has made many things obsolete since the whole company is managed through one program, but the logic must remain. This is specially important for auditors that need to check the validity of the inputs, and track their sources.

Subsidiary ledgers are generally used for accounts receivable, accounts payable, fixed assets, inventory and purchases (that apply to other things than inventory).