General Ledger vs Subledger: Whats the Difference? In-Depth

General Ledger vs Subledger: Whats the Difference? In-Depth

In contrast, the general ledger maintains summarized data for various financial categories, offering a broader but less detailed perspective. It contains account totals and balances, providing an overview of the organization’s financial position. The general ledger contains all of the debit and credits that have been recorded for transactions incurred by a company.

  1. One area that would be challenging would be the interaction of the various subledgers with the general ledger, especially with a multinational, multi-currency operation.
  2. A financial transaction is any exchange or interaction of a monetary value that impacts a business.
  3. However, the general ledger only includes one ledger account for each area.
  4. Subledgers can take on more of the transactional and detailed workload, allowing the general ledger to operate in a more summarized and streamlined manner.
  5. On top of that, the general ledger segregates those records into debit and credit accounts.

An accounting general ledger is a record of all of a company’s financial transactions. It contains detailed information about each transaction, including dates, amounts, and descriptions. Most importantly, from an accounting perspective, the general ledger includes debits and credits for each transaction, as explained in more detail below. In conclusion, the subledger and the general ledger are important tools used to maintain precise control of financial transactions. Both registries have their own functions and features, so it is important to understand when to use each of them.

They won’t be able to find the financial transactions that power your general ledger chart of accounts because there’s a lack of data lineage. All of a sudden, your audit bill goes through the roof and your weekend plans go out the door. Another common mistake in general ledger accounting is the misclassification of transactions. A fixed asset purchase that was mistakenly posted under operating expenses would be an example of this.

Simplification of financial reports

At each year-end, companies close every account within the general ledger. Companies rely on their accounting function to record and report transactions accurately. This function provides the base for subledger vs general ledger the company to prepare financial statements. A company might keep a subsidiary ledger for its customer accounts, each of which connects to the accounts receivable totaled in the general ledger.

The bookkeeper typically places the account title at the top of the “T” and records debit entries on the left side and credit entries on the right. The general ledger sometimes displays additional columns for particulars such as transaction description, date, and serial number. I understand that in a paper system, a sub-ledger makes a lot of sense as you can see the detail of the sales transactions throughout a period (a day/week/month, whatever the interval is). Then the general ledger shows the “big picture” of your sales, accounts receivable, etc. Then, Leapfin automatically applies revenue logic to transaction data.

These are known as errors of principle, since they result from failing to correctly apply accounting principles. Misclassified transactions can be especially difficult to detect, as debits and credits will typically still remain in balance even with these mistakes. By categorizing and dividing accounts into specific subaccounts, greater clarity is achieved on the details of income, expenses, assets and liabilities. Once a week or once a month, a summary of the transaction information from the related subsidiary ledger accounts is posted to the general ledger so that it contributes to the trial balance.

Common Mistakes in General Ledger Accounting

The purpose and use of a subsidiary ledger are to provide records of a company’s financial transactions. And, because there are many per month or years, the subsidiary ledger helps track, collect, and categorize data of those transactions that are posted into the journal. A general ledger compiles a record of all financial transactions that occur over a period of time for a company.

To sustain timely performance of daily activities, banking and financial services organizations are turning to modern accounting and finance practices. Each account is assigned a unique account number and name for identification. Transactions are recorded in the ledger following the double-entry accounting method, with each entry consisting of a debit and a credit to maintain the accounting equation’s balance. Although the sub-ledger is secondary to the general ledger, the balance on both should agree. In this case, the general ledger acts as a controlling account for the former.


In this instance, one asset account (cash) is increased by $200, while another asset account (accounts receivable) is reduced by $200. The net result is that both the increase and the decrease only affect one side of the accounting equation. Keeping track of the general ledger is important for general accounting purposes.

Create, review, and approve journals, then electronically certify, post them to and store them with all supporting documentation. Automatically create, populate, and post journals to your ERP based on your rules. Drive visibility, accountability, and control across every accounting checklist. The general ledger allows financial professionals and management to assess historical financial performance, identify trends, and make informed strategic decisions.

Interactions between Subledgers and the General Ledger

Therefore, the sub-ledger does not enhance the information provided in the financial statements. Before entering the ledger, companies sum all transactions and post the total to the ledger. However, some people may confuse about whether they should include these totals in the general ledger or sub-ledger. The accounting function processes that transaction and records it in the books. A company needs to review its general ledger regularly to keep track of all the accounts that they currently handle.

In this post, we’ll share some tips on how to untangle subledger to general ledger reconciliation. It’s easy to manipulate or delete transaction data, especially when Excel is used as a bridge between source data and the general ledger. A fat finger error here, an engineering mistake there, or a report pulled an hour earlier than normal and missing some of yesterday’s transaction, and all your calculations are skewed. A legal practice should also be sure to implement the right internal controls for document retention and recordkeeping. These controls must be in place for legal matters, so be sure controls are implemented for the accounting department as well. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent.