Balance Sheet And Income Statements

999 WordsJul 22, 20154 Pages
In the world of business, it is crucial to keep track of revenues and expenses in order to evaluate the economic condition of one’s business. Other than revenues and expenses, accountants must also document the changes within a business’s assets and liabilities. Changes in assets and liabilities affect the owner’s equity. The revenue and expense accounts are recorded in the income statement, while assets, liabilities, and owner 's equity are recorded in the balance sheet. The balance sheet and income statements make up the general ledger. The purpose of a subsidiary ledger, also known as a subledger or subaccount, is to show the details of a specific account under the general ledger. The subsidiary ledger updates companies on the spending trends of each individual customer. Consequently, the subsidiary ledger can also inform the company of debts it owes to other companies or organizations. The ending balance in the subsidiary ledger should be equivalent to the ending balance in the controlling account, which is a summary of the general ledger. Not all accounts in the general ledger require a subsidiary ledger. Typically, accounts with a high amount of transactions call for a subsidiary ledger. This is extremely common in big companies that provide services in exchange for cash. By having subsidiary ledgers, large corporations can keep better records of their fiscal information. These organized records, in turn, give owners a chance to evaluate the productivity of the
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