Future Business Leaders of America (FBLA) Accounting Practice Test

What is an accounts receivable subsidiary ledger?

1. A summary of total sales for a period

2. A separate ledger containing accounts for all charge customers

3. An index of all company assets

4. A record of all cash transactions

The correct answer is: A separate ledger containing accounts for all charge customers

An accounts receivable subsidiary ledger is a specialized ledger that contains detailed accounts for all charge customers, reflecting the amounts they owe to the business. This ledger provides a breakdown of individual customer balances and transactions, allowing for easier tracking and management of credit sales and collections. By maintaining a separate subsidiary ledger, businesses can efficiently monitor the financial interactions with each customer, facilitating better cash flow management and credit control. The subsidiary ledger is essential for reconciling with the accounts receivable control account in the general ledger, ensuring that the total recorded in the subsidiary ledger matches the aggregate amount in the control account. This helps in identifying any discrepancies quickly and provides a clearer picture of the credit sales performance. In contrast, other options do not accurately define the nature of an accounts receivable subsidiary ledger. For example, a summary of total sales for a period provides aggregate sales information rather than detailed customer accounts. An index of all company assets relates to physical and intangible assets, not amounts owed by customers. A record of all cash transactions pertains to cash inflows and outflows, which is distinct from receivables that deal with credit sales. Thus, the most accurate definition is that the accounts receivable subsidiary ledger contains accounts for all charge customers.