Control Accounts
What are Control Accounts
►A control account is a summary account in the general ledger that shows the totals of transaction
amounts entered in a subsidiary ledger such as sales or purchases ledger during the month.
► Its balance reflects the aggregate balance of the related subsidiary ledger accounts and is, therefore,
used to control the subsidiary ledgers and verify that entries have been made. They provide totals of
debtors and creditors quickly when a trial balance is being prepared.
► Control accounts are an important system of control on the reliability of ledger accounts. They
indicate that errors may have occurred in the ledgers they control.
Table Showing sources for Control Accounts
The purpose of Control Accounts
1. To check on the accuracy
▪ They provide a check on the accuracy of entries made in the personal accounts in the sales ledger and
purchase ledger.
▪ It is very easy to make a mistake in posting entries, because there might be hundreds of entries to make.
- Figures might get transposed while some entries might be omitted altogether, so that an invoice or a
payment transaction does not appear in a personal account as it should.
▪ It is possible to identify the fact that errors have been made by comparing: • The total balance on the
debtors account with the total of individual balances on the personal accounts in the sales ledger.
▪ The total balance on the creditors account with the total of individual balances on the personal accounts
in the purchase ledger.
2. To locate errors By using the control account, a comparison with the individual balances in the sales or
purchase ledger can be made for every week or day of the month, and the error found much more
quickly than if accounts did not exist.
3. To provide debtors and creditors balances more quickly for producing a Trial balance or Balance Sheet.
A single balance on a control account is obviously simpler and quicker than many individual balances in
the sales or purchase ledger.
▪ This means also that the number of accounts in the double entry bookkeeping system can be kept
down to a manageable size.
Types of Control Accounts
► Sales Ledger Control Account
► Purchases Ledger Control Account
The Sales Ledger Control Account
►The sales ledger control account is also known as the Debtors Control Account and the Total
Debtors Account. It comprises the totals of all accounts of a similar nature related to debtors.
► All items that appear in a debtor’s account are also recorded in the debtors control account. The
total of each type of transaction related to debtors is entered on the relevant side of the control
account.
Items / types of transactions related to
debtors include:
Total opening balances of all debtors for the period
Total credit sales for the period
Total sales returns for the period
Total cash received, and cheques received from debtors for the period
Total Discounts Allowed for the period
Total Bad Debts written off for the period
Dishonoured / Returned cheques from debtors for the period
Total closing balances of all debtors for the period
Example of Sales Ledger Control
Account
Activity
Purchases Control Ledger
The purchases ledger control account is also
known as the Creditors Control Account and
the Total Creditors Account. It comprises the
totals of all accounts of a similar nature related
to creditors.
The Purchases
Ledger Control
Account
All items that appear in a creditor’s account
are also recorded in the Creditors Control
Account. The total of each type of transaction
related to creditors is entered on the relevant
side of the control account.
Items / Types of transactions related to
creditors include:
Total Opening balances of all creditors for the period
Total Credit Purchases for the period
Total Purchases Returns for the period
Cash payments and cheque payments to creditors for the period
Total Discounts received for the period
Total closing balances of all creditors for the period
Need for control accounts
As all accounts are kept in different ledgers then it is more likely
that a mistake will occur when a Trial Balance is drawn up. In
addition as the ‘T’ accounts are kept in different ledgers mistakes
are very often hard to locate.
As a result accountants use Control Accounts to check whether
errors have occurred in the Purchases Ledger or the Sales Ledger.
The control account acts as a type of Trial Balance for each
ledger.
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