Htaccess causing subdomain '404 not found' error - .htaccess

Question

I'm trying to create a subdomain for showing clients their websites in development, by creating a 'subdomains' folder within 'public_html', and then creating individual 'subdomain' folders within that 'subdomains' folder, and redirecting each new site to its associated folder.
My problem is I expect with my htaccess code, whereb navigating to, for example, subdomain.website.com, I get the error below:
"The requested URL /.php was not found on this server."
...
Here's the code for my htaccess at the moment, just not sure how I can alter this to allow me to use this setup for each future subdomain in the 'subdomains' folder without getting this issue.
ErrorDocument 404 /404.php
RewriteEngine On
RewriteCond %{REQUEST_FILENAME} !-f
RewriteRule ^([^\.]+)$ $1.php [NC,L]
# RewriteEngine On
# RewriteCond %{HTTP_HOST} !^www\. [NC]
# RewriteRule ^(.*)$ http://www.%{HTTP_HOST}/$1 [R=301,L]
Any help would be greatly appreciated as I'm in way over my head with htaccess stuff. Thank you in advance!
EDIT just confirming that the only file in the subdomain folder at the moment is an index.php file

Answer 1

Add this rule in top of your domain .htaccess file, %1 is your subdomain folder and $1 is your request (default document folder would be index.php).
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteCond %{HTTP_HOST} ^(.*)\.example\.com
RewriteRule ^(.*)$ /%1/$1 [L,NC,QSA]
</IfModule>
Check manual entry of subdomain folder:
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteCond %{HTTP_HOST} ^subdomain\.example\.com
RewriteRule ^(.*)$ /subdomain/$1 [L,NC,QSA]
</IfModule>