What is a subsidiary ledger?

A subsidiary ledger is indeed characterized as a group of individual ledgers that are linked to the general ledger. This relationship allows for a more detailed breakdown of specific accounts, contributing to the accuracy and transparency of financial reporting. For example, accounts payable and accounts receivable can each have their own subsidiary ledgers. These ledgers provide detailed information about specific transactions affecting these accounts, which can then be summarized into the general ledger.

This structure enables easier tracking and management of transactions within each category while simultaneously maintaining a comprehensive view of overall financial data in the general ledger. The integration of subsidiary ledgers with the general ledger is crucial for ensuring that the financial records are both detailed and organized, facilitating effective financial analysis and reporting.