Some general ledger accounts — known as third-party accounts — can be broken down into subsidiary accounts.
These are primarily accounts receivable and accounts payable. This breakdown gives you better visibility into invoices and payments for each of your third parties.
In this article, we cover the following topics:
- Everything you need to know about subsidiary accounting
- Enabling subsidiary accounting in the software
- How subsidiary accounting works in the software
Everything you need to know about subsidiary accounting
In accounting, a subsidiary account is a breakdown of a general ledger account. In practice, subsidiary accounts are only created for third-party accounts — specifically Accounts Payable (401) and Accounts Receivable (411).
If you have recurring vendors or customers, this feature helps you better track payments for each third party. Specifically, you can:
- Quickly spot uncollected customer invoices and/or unpaid vendor invoices;
- Easily identify duplicates for each customer / vendor account.
How it works
The subsidiary accounting feature lets you link specific book entries to a third party.
The software does not create separate sub-accounts for each customer / vendor (e.g., 411001 / 411002, etc.), but it does let you generate a customer or vendor general ledger under Accounting > Documents > General Ledger to track each subsidiary account.
Enabling subsidiary accounting in the software
If you have a high volume of financial transactions and a few key third parties, enabling the subsidiary accounting feature can be very helpful.
Enabling subsidiary accounting
Go to Settings > Accounting and turn on the Subsidiary Accounting option.
If this option doesn't appear, it means you haven't enabled "Accrual Accounting" in your general settings.
Enabling both options is free and takes effect immediately.
Creating your third-party accounts
Once subsidiary accounting is enabled, you can create the third parties you want to track. To do so, go to Accounting > Configuration, then click on Third Parties.
From there, you can add vendors and customers. The two required fields are the third party's name and their type (vendor/customer).
Your subsidiary accounting is now ready to use.
You can now enter book entries and link them to a third party from Accounting > Entry.
To do this, check the "Link to a member or third party" box when entering an entry, then select Vendor or Customer depending on whether it's an expenditure or revenue. The active third parties you've created will appear as suggestions in the field below.
Under Accounting > Documents, you can select the Customer General Ledger and the Vendor General Ledger from the General Ledger options.
How subsidiary accounting works
Once the feature is enabled and your first third parties are created, you can start linking your entries to each third party and tracking the accounting status for each subsidiary account.
Let's walk through an example. Say you have Vendor A, and you want to track their accounting activity.
You've already created this subsidiary account under Accounting > Configuration > Third Parties.
You receive an invoice for $2,000 that you need to enter into the software.
Go to Accounting > Entry > Expenditure and fill in the expenditure details.
Check the Link to a person or third party option, then find your vendor in the Vendor field, as described in this section.
Click Save, and once the invoice is entered, you'll be able to find the entries linked to your vendors — and specifically to Vendor A — in the General Ledger and Trial Balance under Accounting > Documents.
If you do the same for all vendors and customers you want to track with a subsidiary account, you'll have a full accounting snapshot for each one. You'll be able to see at a glance whether the account balance is in debit, credit, or at zero.
The process works the same way for customer third parties.
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