## **Learning Outcomes**

After reading this article, you will be able to explain the role of subsidiary ledgers, describe how aged listings support credit control, interpret the use and function of ledger control accounts, and outline essential practices for managing credit customers. You will understand key definitions, see practical examples, and identify common exam pitfalls relevant to this core bookkeeping topic.

## **ACCA Maintaining Financial Records (FA2) Syllabus**

For ACCA Maintaining Financial Records (FA2), you are required to understand the recording and management of receivables and payables through subsidiary ledgers and be able to apply basic credit control procedures. In particular, you should focus on:

- The division between general ledger accounts and subsidiary (memorandum) ledgers
- The preparation, purpose, and interpretation of aged receivables and payables listings
- The function and reconciliation of receivables and payables control accounts
- The importance and basic methods of credit control for sales on credit
- The role of aged listings in identifying overdue accounts and supporting effective debt collection processes

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. Which list shows the outstanding amounts due from each credit customer, analyzed by how long each amount has been outstanding?
   a) Supplier statement reconciliation
   b) Trial balance
   c) Aged receivables listing
   d) Cash book

2. What is the main function of a receivables control account in the general ledger?
   a) To record only cash sales
   b) To summarize the total of individual customer accounts
   c) To calculate profits
   d) To reconcile the bank account

3. List two actions a business might take after identifying overdue accounts from an aged listing.

4. True or false? Subsidiary ledgers form part of the double-entry system and appear in the trial balance.

## **Introduction**

Many businesses sell goods or services on credit. Recording and managing amounts owed by customers or owed to suppliers requires more detail than a single balance in the general ledger – this is where subsidiary ledgers are used. Subsidiary ledgers, also called memorandum ledgers, record transactions for individual customers or suppliers. The general ledger holds a summarized control account.

Aged listings, generated from these subsidiary ledgers, help businesses monitor which debts are overdue and take action. This is a key component of basic credit control, ensuring cash flow and reducing bad debts. For ACCA FA2, you must understand these records, how aged listings are prepared, and how they guide effective credit management.

> **Key Term: subsidiary ledger**
> A book or electronic record keeping the individual account details for customers (receivables) or suppliers (payables) outside the main general ledger.
>
> **Key Term: control account**
> A summary account in the general ledger that collects the total balance of the related subsidiary ledger for reconciliation and reporting.
>
> **Key Term: aged listing**
> A report showing outstanding amounts owed by each customer or owed to each supplier at a specified point, analyzed by periods of age (e.g., current, 30 days, 60 days overdue).

## THE STRUCTURE AND USE OF SUBSIDIARY LEDGERS

### The General Ledger and Subsidiary Ledgers

The general ledger holds the main financial accounts, including aggregate balances for assets, liabilities, income, and expenses. For businesses with many credit customers or suppliers, it is impractical to include each account in the general ledger. Instead, only summary balances appear there.

Subsidiary ledgers, sometimes called memorandum ledgers, maintain detailed records for individual customers (receivables ledger) and suppliers (payables ledger).

- Receivables (sales) ledger: records all transactions with each credit customer.
- Payables (purchase) ledger: records all transactions with each credit supplier.

Only the total of these subsidiary ledgers is posted regularly to the relevant control account (Receivables Control Account or Payables Control Account) in the general ledger. This allows the business to produce a trial balance easily and maintain confidentiality of detailed customer/supplier information.

### Control Accounts and Reconciliation

Control accounts in the general ledger act as a check on the accuracy of the subsidiary ledgers. For example, the receivables control account should match the total of all individual balances in the receivables ledger. Regular reconciliation helps detect recording errors, missed postings, or possible fraud.

> **Key Term: reconciliation**
> The process of comparing two sets of records (e.g., subsidiary ledger and control account) to identify and resolve any differences.

## AGED LISTINGS: PREPARATION AND PURPOSE

### What Is an Aged Listing?

An aged listing (aged analysis) is a report produced from the subsidiary ledger. It shows each outstanding balance owed by a customer or to a supplier, grouped by time periods (e.g., current, 1–30 days overdue, 31–60 days overdue, 61+ days). This helps the business quickly identify overdue amounts.

Aged listings are mainly prepared for:

- Receivables: to monitor unpaid sales invoices
- Payables: to track outstanding invoices owed to suppliers

### **Worked Example 1.1**

A business has the following accounts in its receivables ledger at 31 July:

| Customer    | Total Owed | Current | 1–30 days overdue | 31–60 days overdue | Over 60 days overdue |
| ----------- | ---------- | ------- | ----------------- | ------------------ | -------------------- |
| B Khan      | \$800      | \$300   | \$500             | \$0                | \$0                  |
| E Green Ltd | \$2,000    | \$0     | \$1,200           | \$800              | \$0                  |
| M Chow      | \$1,500    | \$0     | \$0               | \$1,000            | \$500                |

**Which customer requires immediate credit control attention, and why?**

> **Answer:**
> M Chow owes \$500 that is more than 60 days overdue and \$1,000 that is between 31–60 days overdue. This level of aged debt signals slow payment and may require prompt follow-up to avoid bad debts.

### How Aged Listings Support Credit Control

Credit controllers use aged listings to prioritize actions:

- Remind customers of upcoming or overdue payments
- Suspend further credit for persistently overdue customers
- Begin formal debt recovery or consider writing off as irrecoverable debt

For payables, aged listings help ensure suppliers are paid within agreed terms to maintain good relationships and avoid penalties.

### **Worked Example 1.2**

Suppose a business's aged receivables listing at month-end appears to total \$47,500, but the receivables control account balance in the general ledger shows \$48,000. What might account for the difference, and what action should be taken?

> **Answer:**
> The \$500 difference may be due to errors (e.g., missing entries, double postings, timing differences). The business should reconcile the subsidiary ledger totals against the control account, investigate discrepancies, and correct any mistakes in the records.

### **Exam Warning**

Be ready to explain how to reconcile subsidiary ledger totals with the control account and identify typical reasons for discrepancies in an exam scenario. Do not confuse the detailed memorandum ledgers, which are not part of the double-entry system, with the general ledger control accounts, which are.

## BASIC PRINCIPLES OF CREDIT CONTROL

Credit control refers to the policies and procedures a business uses to ensure customers pay on time and bad debts are minimized. Effective use of aged listings is central to this process.

Steps in basic credit control typically include:

- Reviewing aged receivables listings regularly
- Contacting customers with overdue balances promptly (via reminder letters, phone calls, or statements)
- Placing overdue accounts on hold or suspending further credit if necessary
- Agreeing payment plans or charging interest on overdue amounts (if permitted)
- Initiating debt recovery procedures or writing off irrecoverable debts when appropriate

Sound credit control improves cash flow and reduces the risk of irrecoverable debts.

> **Key Term: credit control**
> The process of managing and monitoring customer credit accounts, chasing overdue payments, and taking action to recover debts.

### **Revision Tip**

Know the typical credit control steps and the structure of an aged listing for the exam. Practice reconciling subsidiary ledger totals with the control account.

## **Summary**

Subsidiary ledgers are essential for recording detailed transactions with individual customers and suppliers. Control accounts in the general ledger summarize these balances for reporting and help detect errors. Aged listings provide a clear overview of overdue accounts, allowing businesses to identify risks and manage credit efficiently. Effective credit control relies on systematic monitoring using aged listings and consistent follow-up on overdue debts.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Define subsidiary ledgers, control accounts, and aged listings
- Describe how subsidiary and general ledgers interact via control accounts
- Explain how aged listings are prepared and analyzed
- Identify the main uses of aged listings for credit control
- Recognize basic reconciliation steps between subsidiary ledgers and control accounts
- List key credit control actions based on aged listings

## **Key Terms and Concepts**

- subsidiary ledger
- control account
- aged listing
- reconciliation
- credit control

Subsidiary ledgers - Aged listings and credit control basics