An account in a general ledger that summarizes all accounts in a subsidiary ledger is what?
is an accounting equation
The account in a general ledger that summarizes all accounts in a subsidiary ledger is known as a control account.
To understand why, let's break it down:
1. General Ledger: The general ledger is a bookkeeping system that contains all the financial transactions of a business. It is the master ledger that records transactions for all the accounts in a company, including assets, liabilities, equity, revenue, and expenses.
2. Subsidiary Ledger: A subsidiary ledger is a detailed, supplementary ledger that supports the information recorded in the general ledger. It provides more specific information about individual accounts, such as accounts receivable, accounts payable, inventory, and fixed assets.
3. Control Account: A control account is an account in the general ledger that summarizes the balances of related accounts in the subsidiary ledger. It acts as a control mechanism to ensure that the total of all the individual accounts in the subsidiary ledger matches the balance in the control account in the general ledger. In other words, it helps in reconciling the subsidiary ledger balances with the general ledger.
By having a control account, businesses can maintain the overall integrity and accuracy of their financial records. It allows for easy monitoring and identification of discrepancies between the subsidiary and general ledger balances, ensuring that the financial statements are correct and reliable.