The accounts represented in a general ledger match up one-for-one with the accounts in a company's chart of accounts. However, in some instances there is a need to track transactions within a single account in more detail. This is accomplished by using a subsidiary ledger.

A subsidiary ledger, also called a subledger or subaccount, breaks out a single general ledger account into subgroups that share common information. Individual transactions are posted to the general ledger account, called the controlling account, and to the appropriate subsidiary ledger. In accounting software, you only have to make the entry in the subaccount and the software automatically makes the corresponding entry in the controlling account. When preparing the Trial Balance the subsidiary ledger is totalled and compared to the controlling account to verify they are in agreement.

It is important to understand that the subsidiary ledger is not a single ledger but a type of ledger. A company will only have one general ledger, but it can have multiple subsidiary ledgers. Below are some different types of subsidiary ledgers a company might have.

If you have four customers that owe you $10,000 each for credit sales, your general ledger will show a total of $40,000 in Accounts Receivable. If one of them pays you off, you can easily examine the general ledger to determine that your  Accounts Receivable balance is now $30,000. However, your general ledger can't tell you who owes you how much...

That is where the Accounts Receivable Subsidiary Ledger comes in.

In the Accounts Receivable Subsidiary Ledger, each credit customer has their own account, and their own balance. This is a big help for billing and collections. In the transactions described above, a $10,000 entry would be debited from each of the four customer accounts in the subledger (representing the original sales), and a $10,000 credit would be posted to the appropriate customer account in the subledger for the payoff. Entries to the Subsidiary Ledgers (customer accounts) are made at the same time as entries in the general ledger controlling account so they always agree.

Periodically, the customer accounts would be totalled and compared with the balance in the general ledger controlling account (in this case Accounts Receivable) to prove up Accounts Receivable. This is done as part of preparing the Trial Balance.

If you have four suppliers that you owe $10,000 each for credit purchases, your general ledger will show a total of $40,000 in Accounts Payable. If you pay off one of them, you can easily examine the general ledger to determine that your Accounts Payable balance is now $30,000. However, your general ledger can't tell you who you still owe or how much...

That is where the Accounts Payable Subsidiary Ledger comes in.

In the Accounts Payable Subsidiary Ledger, each supplier has their own account and their own balance. (This is very useful for managing your payables and cash flow.) In the transactions described above, a $10,000 entry would be credited to each of the four supplier accounts in the subledger (representing the original purchases), and a $10,000 debit would be posted to the appropriate supplier account in the subledger for the payoff. Entries to the Subsidiary Ledgers (supplier accounts) are made at the same time as entries in the general ledger controlling account so that they always agree.

Periodically, the supplier accounts would be totalled and compared with the balance in the general ledger controlling account (in this case Accounts Payable) to prove up Accounts Payable. This is done as part of preparing the Trial Balance.

While Accounts Receivable and Accounts Payable are commonly used with subsidiary ledgers, other accounts can benefit from this approach. Here are three examples:

Notes Receivable Subsidiary Ledger -- A company (such as an investment house) that holds a large number of notes receivable can use a subsidiary ledger for Notes Receivable. This can include information about the principal amount, due date, and payer. This subsidiary ledger is otherwise similar to the Accounts Receivable Subsidiary Ledger, except in this case the controlling account is Notes Receivable.

Notes Payable Subsidiary Ledger -- Like Notes Receivable, a company can use a Notes Payable Subsidiary Ledger if they have numerous notes outstanding. This subledger can include information about the principal amount, due date, and payee. This subsidiary ledger is otherwise similar to the Accounts Payable Subsidiary Ledger, except in this case the controlling account is Notes Payable.

Equipment Subsidiary Ledger -- Some companies carry a large amount of equipment, each of which must be depreciated over a number of years. In this case, the depreciation is recorded for each item in the Equipment Subsidiary Ledger. This subledger can include information about the aquisition and disposal of the item, the accumulated depreciation, and current book value. The controlling account for this subledger is Equipment.