CHAPTER TWO

General and Subsidiary Ledgers

Description of Ledgers
 ledger is the entire group of accounts
maintained by an accounting unit
 Transactions are an events w/c must be
recorded in the register, but reports are
produced from the ledgers.
Two types of ledgers are maintained in the FGE
accounting system:
 General Ledgers and
Subsidiary Ledger
• General Ledger
 A ledger card is maintained for every account code recorded
in the register.
 Register: A chronological listing of all transactions the book
of original entry in to the accounting system for all accounts.
 Ledger may have its own
• ledger card size
• ledger card thickness
• ledger card titles
• ledger card colors
• The format of a Ledger Card in the subsidiary Ledger is the
same as the format of the Ledger Card in the General ledger.
But ledger card colors is the mechanism in the system to
easily differentiate them physically.
 Cont’d
The aggregate of all such ledger cards is the
general ledger.
The general ledger is a set of self-balancing
ledger cards because at all times the total debits
and the total credits recorded in the general
ledger are equal
the general ledger simplifies and improves the
report generation process
What is the D/c B/n general ledger and controlling account

– all controlling account are general ledger

– all general ledger are not controlling account
– controlling accounts provide information for
preparation of reports
– all general ledger are sources of information to
complete reports
• Subsidiary Ledger
 A controlling account is an account in the
general ledger that maintains the total balance
of all related accounts in a subsidiary ledger
 A subsidiary ledger is a ledger that is separate
from the general ledger and contains transaction
details of each control account in the general
ledger
 Any account in the general ledger that requires
more detail than simply the total account
balance becomes a control account with a
Subsidiary Ledger
• A subsidiary ledger is not a set of self-balancing
accounts.
• Not all debits in a subsidiary ledger are equal to all
credits in the subsidiary ledger.
• The source documents for entries in the ledger is:
transaction register
The purpose of control accounts and subsidiary
ledger accounts is:
• to facilitate the report generation process
• minimize the size of the general ledger and
• Maintain sufficiently detailed records regarding
account balances to assist proper financial
management.
 Cont’d
A Subsidiary Ledger is not maintained for
all accounts in the General Ledger.
Subsidiary Ledgers are only maintained for
accounts: Within the General Ledger that
requires more detail than simply the total
account balance.
2.2 Structures and Organization of Ledgers
• Structure :the relationship that exists between
general and subsidiary ledger and
• Organization : the systematic grouping in general
ledger.
• Structure of Ledgers
describes when an account in the general ledger is
treated as a control account.
• Two criteria define whether an account code is a
control account with a related subsidiary ledger:
1. Monthly reporting requirements
2. Management and control of the account balance
There are D/t accounts maintained by FGE such
as:
a. Recurrent and Capital Expenditure
• An accounting unit is required to report
recurrent and capital expenditures at the level of
each BI managed by it.
• Expenditure control accounts are maintained in
the general ledger for each item of expenditure
and type of budget.
• The control account contains information whose
detail is shown in the subsidiary ledger.
• a subsidiary ledger is maintained for each
 The controlling account maintained for expenditure
items helps:
– To keep the General Ledger in balance and provide a
control over the accuracy of the recording in the
associated Subsidiary Ledgers.
– to provide information on total expenditures by item
of expenditure
– to provide information on total expenditures by type
of budget for the accounting unit
– Accounts in the Subsidiary Ledger provide information
on:
– total expenditures by type of budget managed by the accounting unit
– item of expenditure for each BI managed by the accounting unit
 B. Revenue
• An accounting unit is required to report
revenue at the level of the accounting unit and
not the level of each BI managed by it.
• an account should be maintained in the general
ledger for each item of revenue by account
code.
• Since there is no reporting requirement at the
level of each BI, a subsidiary ledger is not
maintained for items of revenue
 Other Accounts
• Other categories of accounts maintained in the
general ledger include:
• Transfers
• Cash and Cash Equivalents
• Receivables
• Payables
• Letters of Credit
1. Transfers: are not control accounts and have no
related Subsidiary Ledgers.
2. Cash and Cash Equivalents: are not control
accounts and have no related Subsidiary
Ledgers.
Cash and cash equivalents categories may contain
control accounts with Subsidiary Ledgers to
maintain sufficiently detailed information in the
accounts for control and management.
3, Receivables, Payables, and Letters of Credit: are
control accounts with related Subsidiary
Ledgers.
Organization: The general ledger of FGE is organized
into seven broad categories comprising:
1. Revenue, Assistance or Loan account
2. Expenditure accounts
3. Transfer accounts
4. Asset accounts
5. Liability accounts
6. Letters of Credit accounts
7. Net Asset/Equity account
ALL THE ACCOUNTS WILL BE ORGANIZED IN THE
SEQUINCE OF ACCONT CODES
 A Subsidiary Ledger is not maintained for
items of revenue, because:

• there is a need of management control on

revenue
• there is no reporting requirement at the level
of each BI
• revenue is budgeted
• revenue is recognized at the BI level
 Cont’d
• Transfer: Actual cash movements or non-cash
(nominal movements with in government that
do not create obligations to provide further
documentation or repayment.
• Transfers; Some of the account categories do
not contain control accounts with Subsidiary
Ledgers.
2.3 Recording Entries in Ledgers
Recording Transactions into the Ledger Card of the General
Ledger
 in a register is also
Each transaction recorded
recorded in the related general ledger.
 Each transaction is recorded in two separate
ledger cards because two accounts are
affected by each transaction
• The only source document to the general
Ledger is the register.
• The processes used in posting to the general ledger and in the
subsidiary ledgers from all FGE Registers are the same
regardless of whether the transactions involve domestic or
foreign currency.
Month end activities related to General and subsidiary ledgers
• The general ledger account balances must be determined at
the end of each month.
• Total debit should be equal to total credit if not an error has
occurred
• The following types of errors should be verified to balance
the general ledger
 An incorrect amount is transcribed into the Ledger Card from
the Register.
 An amount is incorrectly posted
 Only one side (either debit or credit) of a transaction is
posted into the general ledger
 An arithmetic error has occurred
 Permanent account balances are not carried forward
correctly from the previous year.
THANK YOU ALL