CONTROL ACCOUNTS
Meaning
A control account is a summary account
containing totals for transactions stored in the
ledger to which that control account belongs.
For example, a sales ledger will have a sales
ledger control account and a purchases ledger
will have a purchases ledger control account.
The control account provides a cross-check on
each, in other words, to control them
Uses of control accounts
SALES LEDGER CONTROL ACCOUNT
This is also referred to as a total trade receivables
account or Debtors control account. This account
resembles the account of a credit customer, but
instead of containing transactions concerned with
just one person or business it contains
transactions relating to all the debtors. A typical
sales ledger control account is shown as follows.
As this account acts as a check on the individual
credit customers’ accounts, it should be prepared
independently and information in the individual
accounts of the credit customers must not be
used. (An error in the sales ledger would not be
revealed if the control account is prepared from
the accounts in that ledger.) The information to
prepare a sales ledger control account is obtained
from the books of prime entry. The sources of
information are summarised as follows
Table 1. information sources for the sales ledger control account entries
Example 1. Sales ledger control Accounts
PURCHASES LEDGER CONTROL ACCOUNT
This is also known as a total trade payables
account OR Creditors control Account. This
account resembles the account of a credit
supplier, but instead of containing
transactions concerned with just one person
or business it contains transactions relating
to all the creditors. A typical purchases
ledger control account is shown as follows
• This account serves a similar purpose to the
sales ledger control account. It acts as a check on
the individual credit suppliers’ accounts and
must be prepared independently and not from
information in the individual accounts of the
credit suppliers. The information to prepare a
purchases ledger control account is obtained
from the books of prime entry as shown below
Table 2:Information sources for the purchases ledger control account entries
Example 2. Purchases ledger Control account
BALANCES ON BOTH SIDES OF A CONTROL ACCOUNT
Example 3
CONTRA ENTRIES IN CONTROL ACCOUNTS
⮚Contra entries are also known as inter-ledger transfers
or set-offs.
It may happen that a business sells goods to another
business and also buys different goods from that
business. This means that there will be two ledger
accounts for that business – one in the sales ledger and
the other in the purchases ledger. Rather than each
business sending the other a cheque to cover the
amount due, they may agree to set one account off
against the other. Any remaining amount will be settled
by one business issuing a cheque.
Example 4
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