Definition: The accounts receivable ledger, also called the customers ledger, is a subsidiary ledger that lists all the customers that owe money to the company along with their current balances. In other words, the A/R ledger is a summary of all current and outstanding accounts receivable at the end of a period. This individual detail of every customer’s balance is not listed or recorded in the general ledger.
What Does Accounts Receivable Ledger Mean?
In a standard accounting system, the general ledger only contains one main accounts receivable account. This account equals the sum total of all customer account balances at the end of a period. There is no detail the main account to keep the general ledger clean and uncluttered.
Think about it this way. A company could have hundreds or thousands of customers with account balances. If the GL had to include detail for each account, it would create a mess and make it difficult for bookkeepers to navigate the GL. That’s why the accounts receivable ledger holds all the details, so the GL account can be slimmed down.
The accounts receivable ledger records and organizes purchases made by each customer and tracks the balances of each account. Each credit purchase recorded in the subsidiary ledger includes a date, description of the purchase, amount, as well as payment terms. The A/R ledger is also used to track the payments made by each customer.
When a customer purchases a product on credit, the store debits its A/R balance and credits a sale account. When the customer makes a payment to pay down his account balance, the debits cash and credits the A/R balance. Both of these transactions are tracked in the subsidiary ledger, so at the end of the period the bookkeeper can print a report with the total balances owed by each customer. They can also use this ledger for debt collection purposes on customers who aren’t making their payments.