Difference between General Ledger and Subsidiary Ledger

Difference between General Ledger and Subsidiary Ledger

General ledger contains all accounts and control account for some transaction. Control accounts basically a summary account for large number of accounts.

Subsidiary ledger contains the individual account of debtor and creditor. Subsidiary ledger is maintained for better management of record because technically it is not feasible for general ledger to have hundred of individual account.

1. Double Entry

General ledger is integral record and forms a double entry cycle. Subsidiary ledger is memorandum record in the accounting cycle.

2. Updating

Subsidiary ledger is updated immediately. General ledger is update on periodical especially for control accounts.

3. Reporting

General ledger provides necessary information for preparation of financial statement on timely bases. Where the subsidiary has no direct role in preparation of financial statement.

4. Control

 Subsidiary ledger provides useful information for tracking and controlling the debtor and creditor. Credit policy control is implemented through subsidiary ledger information. 

Difference between Gross profit and net profit

Difference between Gross profit and net profit

Gross profit is calculated by deducting cost of goods sold from the selling price. Where the net profit is calculated after the deducting the operating expenses i.e. administration, selling and financial expenses from the selling price.

It is important to note that net profit sometime called as operating profit because some organization clubs the selling, administration and financial expense into operating expenses.

1. Production Efficiency

Gross profit is a great measure of production efficiency of the entity. Gross profit ratio of the entity can be compared with another entity gross profit ratio or previous period ratio for measurement of efficiency of the production department.

2. Controlling cost

Net profit ratio is a useful tool to control the performance of selling and administration department.Net profit ratio is compared with other entities and previous year for measuring the performance and necessary control actions. Net profit ratio can be calculated by dividing net profit by sales.

Example of Gross profit and Net profit

	$
Sales	10,000
Less: Cost of Sales	(8,000)
Gross Profit	2,000
Less: Operating Expenses	(1,000)
Net Profit	1,000

Difference between Integrated and Interlocking system

Difference between Integrated and Interlocking system

Integrated and interlocking system is two cost book keeping methods. Interlocking system maintains two set of ledger which allows detail analyses of costs and cost related processes. Integrated system keeps only one set of ledgers and both financial and cost accounting information needs are met from the same books.

1. Duplication of record

In Integrated system there is no duplication of record due to single set of ledgers where in interlocking system there is duplication of record due to two set of ledgers.

2. Cost

Interlocking system require more resources than integrated system. More time is required to maintain the interlocking system similarly interlocking system requires more human effort than integrated system. More resources require more cost therefore interlocking system is deemed to be more costly than integrated system.

3. Detailed analyses

Interlocking system allows more detail analyses of cost and other cost related process. These analyses can be performed without any difficulty and delay due to separate set of ledger.

4. Avoid confusion

Interlocking system creates much confusion due to two set of ledger and too much information is being produced from different record and therefore the information management is more difficult in interlocking system. In integrated system this confusion can be avoided.

5. Computerized environment

Integrated system is the only system followed in computerized environment and detail cost analyses are controlled through coding system (Charts of accounts). Interlocking system has no relevance in the computerized system.