Business Accounting 1

CONTROL ACCOUNTS

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Subsidiary Ledgers - Sales Ledger & Purchases Ledger
• All the accounts of individual debtors are put in a ledger
called the Debtors Ledger or Sales Ledger.
• All the accounts of individual creditors are grouped into
another called the Creditors Ledger or Purchases Ledger.

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Reasons for dividing the GL into 3 ledgers
• Very large number of transactions.
• Allows more than one person to work on the ledgers at the
same time (segregation of duty).
• Provides a means of internal control for checking the
accuracy of the ledgers, facilitates the location of errors, and
can deter fraud and misappropriation of cash.

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CONTROL ACCOUNTS

• Control account is an account in the General

Ledger which represents in total the entries in the
subsidiary ledgers
(e.g., sales/debtors ledger control,
purchases / creditors ledger control).

• Control accounts are written up periodically

(usually monthly) from the totals of the relevant
books of prime entry.

• The balances on the control accounts are entered

in the trial balance for the ledger.
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Purpose of Control Accounts
• To provide a check on the accuracy of the subsidiary
ledger it represents. The balance on the control account
should equal the total of the balances in the subsidiary
ledger. If so, this proves the arithmetic accuracy of the
ledger, and that all the entries are on the correct side.
• Check the accuracy of postings in the Ledger.
To deter fraud and the misappropriation of
cash, i.e. internal check / division of duties.

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Purpose of Control Accounts
• Localize errors - to facilitate the location of errors
highlighted in the trial balance by pin-pointing which
subsidiary ledger (or control a/c) is likely to contain the
error(s).

• Enable General Ledger to be self-balanced. This facilitates

the preparation of monthly / quarterly / annual final
accounts since the total values of the debtors and creditors
are immediately available in the control accounts.

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Purpose of Control Accounts

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Sources of Information and Preparation of Control Accounts

The Debtors Control Account

• Also known as Sales Ledger Control Account or Total Debtors
Account.

• All items which appear in a individual debtor’s account are

also recorded in the Debtors Control Account.

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Sources of Information and Preparation of Control Accounts

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Sources of Information and Preparation of Control Accounts

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Sources of Information and Preparation of Control Accounts

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Sources of Information and Preparation of Control Accounts

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Sources of Information and Preparation of Control Accounts

The Creditors Control Account

• Also known as Purchase Ledger Control Account or Total
Creditors Account.

• All items which appear in a individual creditor’s account are

also recorded in the Creditors Control Account.

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Sources of Information and Preparation of Control Accounts

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Sources of Information and Preparation of Control Accounts

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Sources of Information and Preparation of Control Accounts

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Sources of Information and Preparation of Control Accounts

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Example 1

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Example 1

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Reconciliation of Control A/cs & Subsidiary Books

• The balance of Debtors/Creditors Control a/cs should = total

of all individual debtors’/creditors’ accounts in the
Sales/Purchase ledger.

• Should both balances are not equal, it implies there are

errors.

• Checking & adjustments must be made to get the balances

equal, i.e. to reconcile both balances & explain reasons to
such differences.

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