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What Is the Difference Between a Subsidiary and General Ledger?

A general ledger focuses on major account categories.
Subsidiary ledgers keep track of the details in a general ledger.
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  • Written By: Terry Masters
  • Edited By: Shereen Skola
  • Last Modified Date: 16 September 2014
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    Conjecture Corporation
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The difference between subsidiary and general ledger accounts is functional. A company's general ledger is the book of top-tier accounts that make up its accounting system. The subsidiary ledger is a sub-account of a general ledger account. General ledgers record line item transactions in major account categories. Subsidiary ledgers provide the details for one of those line items, creating a separate mini account for the item that can track transactions that are specific to that one item.

All businesses are required to maintain a bookkeeping system by government agencies. Smaller businesses maintain books so tax authorities can collect sales, employment and income taxes on a periodic basis. Major public corporations have those responsibilities and are also required by government securities regulators to maintain a bookkeeping system to report the corporation's financial position to investors. Although non-public businesses can technically maintain any sort of bookkeeping system that accurately reflects revenue and expenses, many conform their systems to the standards set by public corporations. Public corporations use a system of double-entry bookkeeping that complies with the standards set by international and national accounting standards review boards.

Double-entry bookkeeping is a system that tracks seven types of accounts:

  • assets
  • liabilities
  • revenue
  • expenses
  • gains
  • losses
  • owner's equity

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These accounts are collectively called the general ledger. The general ledger maintains general accounts that fall under the seven account categories. For example, businesses typically have general ledger accounts for fixed assets, current assets, current liabilities, long-term liabilities, sales revenue and administrative expense. Entries are made to these accounts using offsetting debit and credit notations.

Since the general ledger accounts are top-tier accounts that can contain subcomponents, subsidiary ledgers are used to provide substantiating details to an account line item. Subsidiary and general ledger accounts have a dependent relationship, but the way a person manages the two types of accounts and enters information is the same. The difference between subsidiary and general ledger accounts lies simply in the way the accounts are used.

For example, a wholesaler would usually maintain a revenue account for sales. This account is a top-tier general ledger account, because it collects all of the sales information by period. The wholesaler likely has client accounts, however, that make up the sales figures and might be listed in the general ledger by placing the each client on a separate line with the total amount of sales for each client for the year. In the accounting system, the general ledger sales account could have subsidiary ledgers attached to it for each client. The individual transactions that are specific to that client would be recorded in the client's subsidiary ledger account as a detail of the total amount recorded in the general ledger.

Subsidiary and general ledger accounts check and balance each other. The general ledger line that the subsidiary ledger details is called the controlling account. Totaling the transactions in the subsidiary ledger must equal the amount on the corresponding line in the general ledger account so the accounts remain in balance.

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