Q17-8RQ - Horngren'S Financial And Managerial Accounting

Question

Question: What is the purpose of the raw materials subsidiary ledger? How is it related to the general ledger?

Step-by-Step Solution

Answer

Answer:

The use of raw materials subsidiary ledger allows the company for a better control of inventory as it helps in keeping the track on the quantity and cost of each type of material used in production. A subsidiary ledger contains the details of a general ledger account and the sum of the accounts in the subsidiary ledger equals the balance in the general ledger account.

                                                                               

Step 1: Raw material subsidiary ledger

Raw material subsidiary ledger is maintained to store the cost of material purchased but not yet used in the production. It contain the detail of the individual raw material components.

Step 2: General ledger

General ledger is maintained to record all the company’s transaction undertaken during the year. It contain four parts such as chart of accounts, financial transactions, account balances and accounting period.

The general ledger and the subsidiary ledgers are related to each other because the total of the subsidiary ledger account is equal to the general ledger account and it also explains the transaction of general ledger account.