CONTROL ACCOUNTS

The nature and uses of control accounts:

A Control account contains the totals of all postings made to the accounts in a particular
ledger. Control accounts are usually maintained for the sales and purchase ledgers.
The totals are the periodic totals of the books of prime entry from which postings are
made to the ledger.
The balance of a Control account should equal the total of the balances in the ledger it
controls. Because the entries in the Control accounts are the totals of the books of
prime entry they are also known as Total accounts. Control accounts are kept in the
nominal ledger.
Just as a trial balance acts as a check on the arithmetical accuracy of all the ledgers, a
Control account checks the arithmetical accuracy of a singles ledger. A difference
between a Control account balance and total of the balances in the ledger it controls
shows where a cause of a difference on the trial balance may be found.
A control account is so called because it controls a section of the ledger. By control is
meant that the balance on the control account should equal the total of the balances in
the section of the ledger it is controlling. A sales ledger control account controls the
sales ledger; a purchase ledger control account controls the purchase ledger. f there is
a difference on the trial balance, the control accounts will show whether or not any of
the difference is in the sales or purchase ledger accounts. f the control accounts agree
with the balances on the sales and purchase ledgers, the difference must lie in the
nominal or general ledger.
f the customer accounts are numerous, there may be more than one sales ledger; or
separate sales ledgers may be kept for customers in different geographical regions. A
separate control account will be required for each sales ledger. The same applies if
there is more than one purchase ledger.
Control accounts are kept in the general or nominal ledger, not in the ledgers they are
controlling. The reason for this is gi!en in as below.
Purpose of making of control accounts:
1. To act as independent checks on the arithmetical accuracy of the aggregates of the
balances in the sales and purchase ledgers.
2. To pro!ide totals of debtors and creditors quickly when a trial balance is being
prepared.
3. To identify the ledger or ledgers in which errors ha!e been made when there is a
difference on a trial balance.
4. To act as an independent internal check on the work of the sales and purchase
ledger clerks, to detect errors and deter fraud. "uties should be so di!ided between
staff that the sales and purchase ledger clerks ha!e no access to the control
accounts, and the person who maintains the control accounts has no access to the
sales and purchase ledger accounts. #or this purpose, it is important that the control
accounts should be kept in the nominal ledger and not in the purchases and sales
ledgers.
Limitations:
$. Control accounts may themsel!es contain errors.
%. Control accounts do not guarantee the accuracy of indi!idual ledger accounts, which
may contain compensating errors, for e&ample items posted to the wrong accounts.
Form of control accounts
Control accounts contain in total form all transactions which ha!e been posted as
indi!idual items to the sales and purchase ledgers. They are often known as Total
accounts. The periodic totals of each type of transaction are obtained from the books
of prime entry.

Sales Ledger Control Account: This account, also known as the 'ales (edger Control
Account or Trade recei!ables Account contains all detail of the trade recei!ables)
accounts in the 'ales (edger, but in totals. *ne of the totals in the 'ales ledger Control
Account is total credit sales which is the aggregate of all the sales entered in the trade
recei!able)s accounts.
The total sales shown in the 'ales ledger Control Account is equal to the sum total of
the indi!idual sales posted to the trade recei!ables) accounts in the 'ales (edger. The
sales total is debited to the 'ales ledger Control Account and credited to the 'ales
Account, thus maintaining the double entry principle in the +eneral (edger.
The same procedure is applied in obtaining the other totals to form the 'ales ledger
Control Account. n order to obtain these totals, the Cash Book and Journal need to be
ruled with special columns. #or e&ample, the Cash Book contains receipts from !arious
sources other than debtors. An additional column to record cash recei!ed from debtors
is necessary.
Example:
Sales Journal Sales or Trade receivales Ledger
Dr 'ung ,.T A-C Cr

Sales 800
Dr .. /ricson A-C Cr

Sales 280
Sales Ledger Control Account
Dr Cr

Sales 2340
(Sales Ledger Control Account is also called Debtors Control Account or Total Debtors Account
or Trade Receivables Account)
"ate 0articulars n!oice
1o.
Amount

%22%
Apr34
$%
%2
%5
62

'ung ,.T
.. /ricson
C. Benny
(oo 7.J
'ales Account
228
225
229
2$2
Cr
522
%52
842
4$2
::::
!"#$
Follo%ing is the la&out of the Sales ledger control account:
(Also called Debtors Control Account or Total Debtors Account)
Sales Ledger Control Account
Dr Cr

Balance b-f ;ma<ority= &&& Balance b-f ;minority= >&&
Credit 'ales ;total of sales
<ournal=
&&& 'ales returns ;total of sales
returns <ournal=
>&&
?efunds to credit customers
;from cash book=
&&& Cash-cheques recei!ed from
credit customers ;from cash
book=
>&&
"ishonoured cheques ;from
cash book=
&&& "iscount allowed ;total of
discount column from cash
book=
>&&
nterest charged ;from <ournal= &&& Bad "ebts ;from <ournal= >&&
Bad "ebts reco!ered ;from
<ournal=
&&& Cash from bad debts reco!ered
;from cash book=
>&&
Balance c-f ;total of credit
balances in sales ledger=
&&& 'et off @ purchase ledger ;from
<ournal=
>&&
Balances c-f ;total of debit
balances in sales ledger=
>&&
xxx 'xx
Trade pa&ales or Purchases Ledger Control Account: The Trade payables Control
Account, also called the 0urchases (edger Control Account or Total Creditors Account,
represents all the creditors in the 0urchases (edger. 'ince the accounts of the creditors
are not in the +eneral (edger, a Control Account to replace them has to be constructed
and included in the +eneral (edger to enable a Trial Balance to be drawn up.
The construction of the 0urchases ledger control Account follows the same principle as
the 'ales ledger Control Account, the totals for the entries in the Creditors Control
Account are obtained from books of prime entry. A 0urchases ledger Control Account is
shown followed by the sources of information for the account.
Purchases Journal Purchases Ledger
Dr 'ung ,.T A-C Cr

0urchases 800
Dr .. /ricson A-C Cr

Purchases 280
Purchase Ledger Control Account
Dr Cr

Purchases 2340
(Purchase Ledger Control Account is also called Creditors Control Account or Total Creditors
Account or Total Payables Account.)
Follo%ing is the la&out of the Purchase ledger control account:
Purchase Ledger Control Account

Balance b-f ;minority= &&& Balances b-f ;ma<ority= &&&
0urchase returns ;total of
purchase returns <ournal=
&&& Credit purchases ;total of
purchases <ournal
&&&
Cash - cheques paid to
suppliers ;from cash book=
&&& ?efunds from suppliers ;from
cash book=
&&&
"iscount recei!ed ;total of
discount column from cash
book=
&&& nterest charged by suppliers
;from <ournal=
&&&
'et off @ sales ledger ;from
<ournal=
&&& Balance c-f ;total of debit
balances in purchase ledger=
&&&
Balance c-f ;total of credit
balances in purchase ledger=
&&&
xxx xxx
Transfers or Contras:
"ate 0articulars n!oice
1o.
Amount

%22%
Apr34
$%
%2
%5
62

'ung ,.T
.. /ricson
C. Benny
(oo 7.J
'ales Account
228
225
229
2$2
Cr
522
%52
842
4$2
::::
!"#$
'ometimes a customer of a firm also happens to be a supplier, i.e. the same person is a
trade recei!ables;debtor= for the goods he has bought as well as a trade
payable;creditor= for the goods he has supplied. Ais accounts can be settled by a
transfer or contra. Bhen transfer is made it will always be Credited in the 'ales (edger
Control Account and "ebited in the 0urchases (edger Control Account.
(inorit& )alance in control Accounts:
+enerally, trade recei!able)s ;debtor)s= accounts contain debt balance and trade
payable)s ;creditor)s= accounts contain credit balances. But at times, some trade
recei!ables ;debtors= may ha!e small credit balances and trade payables ;creditors=
may ha!e small debit balances. Take the case of the 'ales (edger. After settling their
accounts, some debtors may return empty containers for which they ha!e been
charged, or in another scenario, they may ha!e been o!ercharged for goods bought.
Bhen these items are credited to their accounts at balancing time, there may be no
debit balance to offset them. As a result, these debtors will ha!e credit balances for the
time being.
Limitations of Control Accounts:
$. Control accounts may themsel!es contain errors.
%. Control accounts do not guarantee the accuracy of indi!idual ledger accounts,
which may contain compensating errors, for e&ample items posted to wrong
accounts.
*econciliation of Control Accounts %ith Ledgers:
Bhen there is a difference between the balance on a Control account and the total of
the balances in the ledger it controls, the cause or causes must be found and the
necessary corrections made. This is known as reconciling the Control accounts.
It is helpful to remember the following :
$. f a transaction is omitted from a book of prime entry, it will be omitted from the
personal account in the sales or purchase ledger and from the Control account.
Both records will be wrong and the Control account will not re!eal the error.
%. f a transaction is entered incorrectly in a book of prime entry, the error will be
repeated in the personal account in the sales or purchase ledger and in the
Control account. Both records will be wrong and the Control account will not
re!eal the error.
6. f an item is copied incorrectly from a book of prime entry to a personal account
in the sales or purchase ledger, the Control account will not be affected, and it
will re!eal that an error has been made.
C. f a total in a book of 0rime entry is incurred, the Control account will be incorrect
but the sales or purchase ledger will not be affected. The Control account will
re!eal that an error has been made.
4. f there is an error in the Totals then the Control Accounts are affected as control
accounts included the information in total form.
#or e&ample; Total of "iscount allowed o!erstated by 422.
D. f there is an error in the books of prime entry, the Control Account will be
incorrect but the 'ales or 0urchase (edgers will not be affected. t will be
recorded in the Adusted Control Account!
#or e&ample, 'ales Journal is o!ercast by $222.
8. f there is an error in the indi"idual accounts of Debtors and Creditors then it will
be recorded in the #econciliation Statement; prepared to reconcile errors in
ledgers.
#or e&ample, 'ales for $422 has been entered correctly in the Sales ournal
but has been entered in the Customer$s account as $42 +
,orked Example:
The following information has been e&tracted from "uprey)s books at 6$ "ecember
%226.

Total of sales ledger balances ;debit= $8 DC2
;credit= $$2
Balance on 'ales (edger Control account ;debit= $5 8$2
The following errors ha!e been disco!ered.
$. A sales in!oice for $22 has been omitted from the sales <ournal.
%. A credit balance of 64 in the sales ledger has been e&tracted as a debit balance
in the list of sales ledger balances.
6. The sales <ournal total for "ecember has been o!erstated by $222.
C. A balance of %42 on a customer)s account in the sales ledger has been set
against the amount owing to him in the purchase ledger but no entries ha!e been
made for this in the 'ales and 0urchase (edger Control accounts.
*e-uired:
Calculate the following at 6$ "ecember %226.
a. the re!ised sales ledger balances.
b. the amended sales ledger control account.
Answer
Revised sales ledger balances:

Before ad<ustment $8 DC2 $$2
n!oice omitted from sales <ournal $22
Credit balance listed as a debit ;64= 64
*evised alances ./ /$0 .#0
Amended Sales Ledger Control Account
%226 %22%
"ec 6$
%22C
Jan $
Balance b-f
n!oice omitted
Balance c-d
Balance b-d
$5 8$2
$22
$C4
.1 200
$8 824
"ec 6$
%22C
Jan $
'ales o!ercastted
Contra to purchase
ledger
Balance c-d
Balance b-d
$ 222
%42
$8 824
.1 200
$C4
Examples of preparing Sales Ledger Control Account and Purchases Ledger
Control Account
Example:
ransactions for !anuar" 2##3
4 !an Sold goods $%& 1'### on credit to Amisha
1# !an Sold goods $%& 1'(## on credit to Patel
24 !an Sold goods $%& 1')## on credit to Prit"
24 !an Sold goods $%& 2'### on credit to *inta
2( !an Amisha returns goods $%& 1##
2( !an Patel returns goods $%& 2##.
2+ !an *inta returns goods $%& 3##
2, !an $ecei-ed $%& +## cash from Amisha after allo.ing her $%& +# discount
2/ !an $ecei-ed $%& ,## cash from Patel after allo.ing her $%& ,# discount
2) !an $ecei-ed $%& 1'### cash from Prit" after allo.ing her $%& 1## discount
3# !an $ecei-ed $%& 1'3## cash from *inta after allo.ing her $%& 13# discount
Sales !ournal
Date Particulars RWF RWF
2##3
4 !an Amisha 1'###
1# !an Patel 1'(##
24 !an Prit" 1')##
2, !an *inta 2'###
31 !an otal ransferred to Sales Account +'4##
Sales Returns Journal
Date Particulars RWF RWF
2##3
1# !an Amisha 1##
2, !an Patel 2##
2) !an *inta 3##
31 !an otal ransferred to Sales $eturns Account +##
Dr Cash Book
Cr
2003 F Discount Cash Bank
RWF RWF RWF
2, !an Amisha +# +##
2/ !an Patel ,# ,##
2) !an Prit" 1## 1'###
3# !an *inta 13# 1'3##
3+# 3'+##
Sales e!"er
Dr #misha #ccount
Cr
Date Details F RWF Date Details F RWF
2##3 2##3
4 !an Sales 1'### 2( !an Sales $eturns 1##
2, !an Cash +##
2, !an Discount Allo.ed +#
31 !an 0alance c1d 24#
1'### 1'###
1 &e2 0alance c1d 24#
Patel #ccount
1# !an Sales 1'(## 2( !an Sales $eturns 2##
2/ !an Cash ,##
2/ !an Discount Allo.ed ,#
31 !an 0alance c1d (3#
1'(## 1'(##
1 &e2 0alance c1d (3#
Prit$ #ccount
24 !an Sales 1')## 2) !an Cash 1###
2) !an Discount Allo.ed 1##
31 !an 0alance c1d /##
1')## 1')##
1 &e2 0alance c1d /##
%inta #ccount
2, !an Sales 2'### 2+ !an Sales $eturns 3##
3# !an Cash 13##
3# !an Discount Allo.ed 13#
31 !an 0alance c1d 2,#
2'### 2'###
1 &e2 0alance c1d 2,#
ist o& !e'tors
RWF
Amisha 24#
Patel (3#
Prit" /##
*inta 2,#
otal 1'/4#
(eneral e!"er
Dr Sales e!"er Control #ccount
Cr
Date Details F RWF Date Details RWF
2##3 2##3
4 !an Credit Sales +'4## 2( !an Sales $eturns +##
2, !an Cash 3'+##
2, !an Discount Allo.ed 3+#
31 !an 0alance c1d 1'/4#
+'4## +'4##
1 &e2 0alance 21d 1'/4#
3ote4 A Sales Ledger 5indi-idual Account6 is used to prepare a de2tors7 list. he total of the
de2tors7 list should 2e e8ual to the 2alance of the Control Account.