What Is an Accounts Payable Subsidiary Ledger?

An accounts payable subsidiary ledger is an accounting ledger that shows the transaction history and amounts owed to each supplier and vendor. An accounts payable (AP) is essentially an extension of credit from a supplier that gives a business (the buyer in the transaction) time to pay for the supplies. The subsidiary ledger records all of the accounts payables that a company owes. The payment terms are typically 30, 60, or 90 days.

Key Takeaways

  • An accounts payable subsidiary ledger is an accounting ledger that shows the transaction history and amounts owed to each supplier and vendor.
  • An accounts payable (AP) is essentially an extension of credit from a supplier that gives a business (the buyer) time to pay for the supplies.
  • The subsidiary ledger records all of the accounts payables that a company owes whereby the aggregate total is carried over to the general ledger.

The balance in the customer accounts is periodically reconciled with the accounts payable balance in the general ledger to ensure accuracy. The accounts payable subsidiary ledger is also commonly referred to as the AP sub-ledger or subaccount.

Understanding an Accounts Payable Subsidiary Ledger

Companies can have various payables owed to vendors or suppliers at any given time. These payables are short-term debts or IOUs from one company to another company. The total amount of payables owed to suppliers is recorded as accounts payable on the general ledger.

The general ledger is a master ledger containing a summary of all the accounts that a company uses in operating its business. The subsidiary ledgers roll up to the general ledger, which records the aggregate totals of the subsidiary ledgers. The general ledger, in turn, allocates these totals into assets, liabilities, and equity accounts. Within most accounting systems, the process is performed via accounting software.

When the financial statements are prepared, the accounts payable total is listed with other short-term financial obligations under the current liabilities section of the balance sheet. The accounts payable subsidiary ledger is a breakdown of the total amount of payables listed on the general ledger. In other words, the subsidiary ledger contains the individual payables owed to each of the suppliers and vendors, as well as the amounts owed.

Since companies can have multiple orders with the same vendor and many different vendors, the accounts payable subsidiary ledger keeps track of what's owed without having to make numerous accounting entries on the general ledger. The subsidiary ledger is essentially a worksheet for all of the payables owed to suppliers.

The accounts payable subsidiary ledger is helpful in providing internal accounting controls. The accounts payable subsidiary ledger amounts can be crosschecked with the aggregate amount reported on the general ledger to prevent errors in reporting. Management can also check to ensure that each invoice from the vendors and suppliers are being recorded.

Example of an Accounts Payable Subsidiary Ledger

As an example, let's say The Ford Motor Company has a general ledger balance that shows a total accounts payable balance of $106 million. However, management wants to see which suppliers are owed and the amounts owed.

The information needed can be gleaned from the accounts payable subsidiary ledger. The subsidiary ledger shows the following:

  • Supplier A is owed $2 million for tires.
  • Supplier B is owed $6 million for car mats.
  • Supplier C is owed $98 million for steel.

The accounts payable subsidiary ledger is similar to other subsidiary ledgers in that it merely provides details of the control account in the general ledger. Other subsidiary account ledgers include the accounts receivable subsidiary ledger, the inventory subsidiary ledger, and the equipment subsidiary ledger.