The general ledger, also called the nominal ledger, holds one account for every type of asset, liability, income and expense, and it is where the double entry is completed. The sales ledger and purchase ledger are subsidiary ledgers: they hold an account for each customer and each supplier, showing who owes what. A single control account in the general ledger carries the total of each subsidiary ledger, and the two must agree; that agreement is the check that individual balances and the accounts tell the same story.

What is the general ledger?

The general ledger is the full set of accounts from which the trial balance and then the year end accounts are prepared. It contains accounts such as bank, fixed assets, sales, wages, rent, VAT and loans, each identified by a nominal code from the chart of accounts. Every transaction is recorded in it with equal debits and credits, so it is the general ledger that has to balance.

What the general ledger does not show, on its own, is detail by customer or supplier. A single trade debtors account showing £48,000 tells the business how much it is owed in total, not by whom or for how long. That detail lives in the subsidiary ledgers.

What are the sales and purchase ledgers?

The sales ledger (also called the receivables ledger or customer ledger) contains a separate account for every credit customer, listing invoices, credit notes, payments and the running balance. The purchase ledger (payables or supplier ledger) does the same for each supplier. ACCA’s teaching material explains that these individual accounts are sometimes called subsidiary ledgers because they sit outside the general ledger accounts where the double entry takes place, which instead hold the transactions and balances for all customers in aggregate.

The subsidiary ledgers are what a business uses day to day: to send statements, chase overdue invoices, run an aged debtors report, decide which suppliers to pay and agree supplier statements. The general ledger is what the accounts are drawn from. Both are needed.

Other subsidiary records work the same way even if they are not usually called ledgers. A fixed asset register lists each asset behind the fixed asset codes, a payroll system holds each employee’s pay behind the wages and PAYE codes, and a stock system holds item level quantities behind the stock code.

How does one transaction reach both ledgers?

Illustration only. A business invoices Customer A for £1,000 plus VAT at the standard rate of 20%, a total of £1,200. Customer A later pays in full.

Event General ledger Sales ledger
Invoice raised Debit trade debtors control £1,200; credit sales £1,000; credit VAT £200 Customer A account increases by £1,200
Payment received Debit bank £1,200; credit trade debtors control £1,200 Customer A account reduces by £1,200

The general ledger entries balance on their own. The sales ledger entry is a memorandum record of the same amount, posted against the named customer. This matches ACCA’s description of an integrated system, where raising a sales invoice posts the general ledger entry and updates the individual customer account at the same moment.

A supplier invoice mirrors it: debit purchases or the relevant expense and VAT, credit trade creditors control, and increase the supplier’s balance in the purchase ledger.

Why are control accounts needed?

A control account is the general ledger account that summarises a subsidiary ledger: trade debtors control (sales ledger control) and trade creditors control (purchase ledger control). It does three jobs.

  1. It keeps the general ledger short. The trial balance shows one debtors figure, not hundreds of customer balances.
  2. It provides an independent check. The control account balance should equal the total of the individual balances in the subsidiary ledger. If they differ, something has been posted to one and not the other, or posted differently.
  3. It helps locate errors and fraud. A difference narrows the search to the receivables or payables area, and someone who alters an individual customer account without a matching general ledger entry will create a difference.

ACCA’s Maintaining Financial Records syllabus lists explaining the purpose of reconciling the receivables and payables ledger control accounts, identifying errors in the control accounts and in the list of balances, and reconciling a supplier’s statement to the supplier’s account. The detailed steps are on our page on sales and purchase ledger control accounts.

Does accounting software make control accounts unnecessary?

In a fully integrated package the control account is generated from the same postings as the customer and supplier accounts. ACCA changed its foundation syllabuses from September 2023 on this basis: questions now assume a computerised system in which sales invoices post to the trade receivables account and the individual customer account automatically, and receivables control account reconciliations are not examined beyond explaining why they would not be needed in such a system. Supplier statement reconciliations are still examined.

In practice differences still arise in software when:

  • a manual journal is posted directly to the debtors or creditors control code, which updates the general ledger but no customer or supplier;
  • opening balances are entered differently in the general ledger and the subsidiary ledger after a software change;
  • a customer receipt is posted to the bank and a suspense or income code rather than allocated to the customer;
  • foreign currency balances are revalued in one ledger but not the other.

So the check is still worth running, at least at each month end and before the year end.

What does the law expect these ledgers to show?

Section 386 of the Companies Act 2006 requires a company’s records to contain a record of its assets and liabilities, which includes what is owed to and by it. Where the business deals in goods, section 386(4) also requires statements of all goods sold and purchased, other than by ordinary retail trade, showing the goods and the buyers and sellers in enough detail to identify them. For most trading companies the sales and purchase ledgers, with the invoices behind them, are how that requirement is met. See our page on accounting records requirements.

For VAT, HMRC’s Notice 700/21 lists purchase and sales books, purchase invoices and copy sales invoices, and credit or debit notes among the business records VAT law requires a registered business to keep, generally for at least six years.

What goes wrong most often?

  • Unallocated cash. Payments sit on a customer account without being matched to invoices, so the aged debtors report overstates old debts even though the total is right.
  • Duplicate supplier accounts. The same supplier set up twice splits the balance and can lead to double payment.
  • Contras posted on one side only. Where a customer is also a supplier and balances are set off, the contra must reduce both the sales ledger and purchase ledger accounts and both control accounts.
  • Credit balances ignored. A customer who has overpaid has a credit balance in the sales ledger; it is a liability, not a negative debtor to be netted off silently.
  • Bad debts written off in the wrong place. Writing off an invoice should reduce the customer’s account and the control account together. Our guide to bad debts covers the accounting and tax treatment.

Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.