What is a Subsidiary Account?

A subsidiary account is an account that is kept within a subsidiary ledger, which in turn summarizes into a control account in the general ledger. A subsidiary account is used to track information at a very detailed level for certain types of transactions, such as accounts receivable and accounts payable.

A control account is a summary-level account in the general ledger that contains aggregated totals. The general ledger is the master set of accounts that summarize all transactions occurring within an entity. Thus, the levels of information feeding into the general ledger are as follows:

Lowest level: subsidiary account (contained within the subsidiary ledger)
Next-lowest level: subsidiary ledger (aggregate total is forwarded to the control account)
Highest level: control account (an account within the general ledger)

For example, a company maintains in its accounting software a record of the amount owed to it by each customer. These subsidiary accounts roll up into an accounts receivable ledger, which contains the total owed by each customer. The grand total balance in the accounts receivable ledger rolls up into the accounts receivable control account in the general ledger.

Subsidiary Account Reconciliations

The balances in subsidiary accounts are typically reconciled to the general ledger account of which they form the detail, usually as part of the month-end closing process. These reconciliations tend to be relatively frequent, since subsidiary ledgers have a large number of transactions pass through them, and so represent a material proportion of the dollar amounts in the general ledger.

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Examples of Subsidiary Accounts

Examples of subsidiary accounts are as follows:

A vendor record is a subsidiary account within the accounts payable ledger, which in turn comprises the detail for the accounts payable control account in the general ledger. The vendor subsidiary account reveals the detail for the amount that is owed to specific suppliers.
A customer record is a subsidiary account within the accounts receivable ledger, which in turn comprises the detail for the accounts receivable control account in the general ledger. The customer subsidiary account reveals the detail for the amount that is owed to the company by specific customers.