CONTROL ACCOUNTS

These are accounts which record all trade payables and trade receivables accounts, in other words
it is a summary of all these transactions.
Purposes of control accounts
 to locate errors
 to deter fraud
 fraud or errors are easier to check
 checking is made easier as sectional ledgers are created
 to provide totals for creditors and debtors quickly

Reasons why a debtor’s account might have a credit balance

 payment in advance
 credit note issued
 overpayment

Limitations of control accounts

 control accounts do not guarantee the accuracy of individual accounts, which may contain
compensating errors, for example items posted to wrong accounts.
 control accounts may themselves contain errors.

WHAT TO NOTE WHEN AMENDING AND RECONCILING CONTROL ACCOUNTS:

TYPE OF ERROR ADJUSTED IN CONTROL RECONCILIATION

ACCOUNTS STATEMENT

Errors in source documents Yes Yes

Complete omission of a Yes Yes

transaction
Casting errors in books of Yes No
original entry
Errors in personal account or No Yes
Individual error

PAGE 16 OF F 5 NOTES AS CORRECTED