Ocampo: Subsidiary Ledgers
THE Balance Sheet, an Accountant’s report of the financial position of the Company as of a given date, is an important tool to manage and grow the business. A strong Balance Sheet means that assets, acquired thru the use of Company funds or thru creditors, are adequate enough to grow revenues.
However, assets as stated on the Balance Sheet can only be used if they exist. Existence of assets therefore is a major fiscal responsibility not only by the Accountant, but by management and the whole Company. It involves the safeguarding of assets from the risk of loss, damage, pilferage and theft. How then does a Company ensure the existence of its assets? One of the most effective ways is to maintain Subsidiary Ledgers.
Balance Sheets show controlling accounts, meaning the totals of the various accounts such as Cash, Receivables, Inventories and Fixed Assets. To ensure the existence of said assets, a Subsidiary Ledger should be maintained for each account. A Subsidiary Ledger is a detailed list of data, the total amount of which tallies with the amount of the controlling account shown in the Balance Sheet.
Cash in Bank – Existence of the amount of Cash in the Bank can best be assured thru a reconciliation of the balance recorded in the Company’s books and in the bank’s records. The Bank Reconciliation will show reconciling items such as outstanding checks, deposits in transit, unrecorded bank charges and interest credited.
Receivables – The Subsidiary Ledger of receivables shows the names of debtors and the amount collectible from them. It also shows the date credit was granted, the date the amount is due and the date the amount was collected. These details ensure the existence of assets, and more importantly, it enables the company to collect credit and convert them to cash. The Subsidiary Ledger of receivables is used to visit debtors and confirm from them the amount of their indebtedness.
Inventories – Inventories include materials and parts used in operation such as machinery and transportation spare parts. It also includes manufacturing materials that are converted as finished goods – another type of inventory. Companies nowadays do not carry an inventory of office and other supplies such as bond papers, ball pens, printer ink and especially paints and other flammable materials because these items are easy to procure and their use is predictable.
The Subsidiary Ledger of inventories includes the name of the item, quantity, amount and the date the item was procured or manufactured. The detailed list itself gives an assurance of the existence of the asset; but a periodic physical count of the inventory ascertains existence.
Fixed Assets – These capitalizable items, because of the material amounts involved and their useful lives extends beyond one year, include land, building, machinery equipment, transportation vehicle, furniture and fixture and office equipment. The details of the Subsidiary Ledger include the identification numbers such as serial number, and make and model of the asset. It also includes the acquisition cost and the department that has custody of the asset. Similar to inventories, the Ledger is used to conduct a periodic physical count to ascertain existence.
Subsidiary Ledgers are critical to the control and management of the business. However, modern day tacticians use age-old strategies as their modus operandi – “confuse the enemy.” This is done by either not preparing Subsidiary Ledgers of Company assets or if ever a Ledger is prepared, it contains ambiguous data and information that will leave users perplexed thereby seizing the moment to commit theft, pilferage and malversation. If there is no intention to commit an anomaly, it then becomes a case of gross negligence in providing vital information to management.
http://www.sunstar.com.ph/pampanga/business/2013/08/15/ocampo-subsidiary-ledgers-298012
Residents of Manila and Angeles City Pampanga are looking for a safe and convenient place to celebrate special occasions or take a shot vacation in the Philippines. Many travel north to Clark to swim at Clearwater Beach Resort which also has lake and picnic grounds to unwind and relax, a very good way to spend quality time with the family and children. Fine dining Yats Restaurant offers sumptuous cozy Christmas dinner, for wine lovers, Clark Wine Center provides exciting shopping options.
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http://www.ClarkWineCenter.com