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Control Accounts

The document outlines the objectives and importance of control accounts in verifying the accuracy of sales and purchases ledgers. It details the preparation of accounts receivable and accounts payable control accounts, along with their sources of information. Key terms such as dishonoured cheques and contra entries are also defined to enhance understanding of the control accounts process.

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3 views3 pages

Control Accounts

The document outlines the objectives and importance of control accounts in verifying the accuracy of sales and purchases ledgers. It details the preparation of accounts receivable and accounts payable control accounts, along with their sources of information. Key terms such as dishonoured cheques and contra entries are also defined to enhance understanding of the control accounts process.

Uploaded by

lollislayer00
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Control Accounts

Objectives

● Understand the need for control accounts


● Prepare sales ledger control accounts
● Prepare purchase ledger control accounts
● Know the sources of information for the control accounts
● Understand the double entry aspect of control accounts
● Appreciate the advantages of control accounts

Control Accounts

This is a process for checking entries in the purchases ledger (accounts Payable control account)
and the sales ledger (accounts receivable control account)

The need of control accounts

Control account is needed to check the accuracy of the sales and purchases ledger. It
summarizes in the entries in the sales and purchases ledger. The totals in the sales and purchases
ledger must agree with the total of the individual balances in the sales and purchases ledgers.
Control accounts are used as an easily accessible source details about the total of the account
receivable account and the accounts payable account.

Accounts Receivable Control Account Accounts Payable Control Account

Transaction Source of Information Transaction Source of Information

Total Credit Sales Sales Book Credit purchases Purchases book

Total receipt from Cash book Payment to accounts Cash book


accounts receivable payable

Discount Allowed Cash book Total discount receive Cash book

Returns inwards Return inwards book Returns outwards Return outwards book

Bad debts written off General Journal

Key Terms
A dishonoured cheque is a cheque that the payee bank will not accept for payment. This also
referred to as returned cheques.

Contra Entry (Set off) this is a transfer between an individual account payable and an account
receivable arising from the fact that the supplier is also a customer, to establish a net amount to
be paid or to be receive.

Debtors Control Account Items

DR CR

Balance B/D (DR Balance B/D (CR

Credit Sales Receipt from Debtor

Interest on overdue amounts Return inwards

Refunds Discount Allowed

Dishonoured Cheque Bad debts

Balance c/d 100 Contra (set off)

Balance c/d 2000

Total 15000 Total 15000

Balance b/d 2000 Balance b/d 100

Creditors Control Account

DR CR

Balance B/D (DR Balance B/D (CR

Payment to creditor Credit Purchases

Return out Int on overdue

Refunds Refunds

Discount received Dishonor/return cheque


Set off

Balance c/d 100 Balance c/d 2000

Total 15000 Total 15000

Balance b/d 2000 Balance b/d 100

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