Professional Documents
Culture Documents
A Control Account contains the totals of all postings made to the accounts in a particular ledger.
They 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 on a control
account should equal the total of the balances in the ledger it controls. Control Accounts are also
known as Total Accounts. They are kept in the nominal (general) ledger.
Purposes of control accounts
1. To act as a check the arithmetical accuracy of the totals of the balances in the sales and
purchases ledgers.
2. To provide totals of debtors and creditors quickly when a trial balance is being prepared.
3. To identify the ledger(s) in which errors have been made when there is a difference on
the trial balance.
4. To act as an internal check on the work of the sales and purchases ledger clerks – to
detect errors and deter fraud, under the charge of a responsible person
Credit sales for period (total of sales journal) Sales return (total of sales returns journal)
Refunds to credit customers (from cash book) Cash received from credit customers /receipts
(from cash book)
Dishonoured cheques (cash book)
Discount allowed (cash book)
Interest charged to customers on overdue
accounts (sales journal or cash book) Bad debt written off (journal)
Bad debt recovered (journal) Cash from bad debt recovered, previously
written off (cash book)
Total of credit balances (if any) in sales ledger
at the end of period c/d Sales ledger balances set off against balances
in the purchase ledger (journal)
Balance c/d to agree with total of debit
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balances in the sales ledger
Note: Do NOT enter the following in the sales ledger control account
Cash sales
Provisions for doubtful
Purchases Ledger Control Account – also known as Account Payable Control Account. It should
equal the total of the balances of the accounts in the ledgers. It shows how much in total a
business owes to its suppliers at a particular point of time.
Note:
debit balances in the purchase ledger must never be deducted from the credit balances
only credit purchases are entered in the purchases ledger control; account. Do NOT
enter cash purchases in it.
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Set off / contra entries. Sometimes, the same person may be a debtor as well as a creditor for the
business. At the end of the month, the smaller amount in his account from one ledger is
transferred to his account in the ledger with large amount. The entry passed for recording this
transfer is known as set off or contra entry.
Uses of Control Accounts
They are an important system of control on the reliability of ledger accounts.
They provide totals of accounts receivable and accounts payable quickly when a trial
balance is being prepared
They may identify ledger (s) in which errors may have been made when there is a
difference on a trial balance.
It helps to monitor and check accounts clerks who may be engaging in fraudulent acts in
the sense that the accountant will always ask for balances of individual accounts for
comparison with the control accounts in General Ledger.
It helps to obtain efficient recordings of transactions.
It makes the location of errors easy in personal accounts.
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Practice question
The following information has been extracted from the books of Shields Enterprises Ltd.
$
At June 1 2014 Purchase Ledger b/d - Debit 1 000
- Credit 17 340
Sales ledger balance b/d Debit 40 580
Credit 720
Month end June 30 2014:
Purchases journal total 75 000
Purchases returns journal 4 150
Sales journal 106 400
Sales returns journal 2 980
Cash book: payments to suppliers 60 540
Cheques received from customers (see note below) 104 900
Purchases discounts 3 670
Sales discounts 5 520
Dishonoured cheques 4 300
Journal: bad debts written off 2 220
Sales ledger balances set against purchases ledger balances 5 800
June 30 - Debit balances on purchases ledger accounts 700
- Credit balances on sales ledger accounts 425
Note: the cash received from customers includes $900 relating to a bad
debt previously written off
Required
Prepare a Purchases Ledger Control Account and a Sales Ledger Control Account for Shields
Enterprises Ltd, for the month of June 2014.