CONTROL ACCOUNTS

What is a Control Account?

A control account is a summary ledger account kept mainly for debtors and creditors. The two common
control accounts are:
i) Sales ledger control account, which the summary account of all debtors
ii) Purchases ledger control account, which the summary account of all creditors

Treatment of control accounts:

 debit entries in the individual personal accounts are also debit entries in the control accounts
 credit entries in the individual personal accounts are also credit entries in the control accounts
 instead of entering transactions individually, entries are made as totals

What are Contra (or Set off) entries?

Contra (or Set off) entries are adjustments made to settle the inter-debt with a business that is both a
debtor and creditor.
Contra (or Set off) entries are treated just like:
 cash received from a debtor, so set off will always be on the credit side of the debtors’ account
or
 cash paid to a creditor, so set off will always be on the debit side of the creditors’ account

Reverse balances or dual balances in a control account:

 Possible reasons for a credit balance in debtor’s account:
i) the debtor pays in advance for the goods
ii) the debtor returns goods after paying for them
iii) cash discount not deducted by the debtor before payment to the business
iv) excess set off against the purchase ledger balance
v) an overpayment by the debtor
 Possible reasons for a debit balance in a creditor’s account:
i) the business pays the creditor in advance for the goods
ii) the business returns goods to the creditor after paying for them
iii) cash discount not deducted by the business before payment to the creditor
iv) excess set off against the sales ledger balance
v) an overpayment to the creditor

Advantages of control accounts:

1) they can verify the arithmetical accuracy of the entries in the personal accounts
2) they can help to reduce fraud if the control accounts are kept by someone other than the regular
bookkeeper
3) draft final accounts can be prepared quickly because the debtor and creditor balances are readily
available
4) they can help to locate errors when the trial balance fails to agree

Disadvantages of control accounts:

1) they will contain errors if there are errors in the books of original entry
2) they incur extra cost because they need a separate bookkeeper to be in charge of them
3) they are unnecessary for small businesses with very few debtors and creditors
4) they are extra books of account that need to be maintained

 I G C S E / G C E O ’ L e ve l |p g . 1
 CONTROL ACCOUNTS

Sales Ledger Control Account

(also called Debtors' Control Account or Total Debtors' Account)
£ £
Balance b/d XX Receipts from debtors (cash/cheques) XX
Credit Sales XX Discounts Allowed XX
Dishonoured Cheque XX Returns in XX
Interest charged to debtors XX Bad Debts XX
Refund to debtors XX Set-off XX
Balance c/d XX
XX XX

Balance b/d XX

Purchase Ledger Control Account

(also called Creditors' Control Account or Total Creditors' Account)
£ £
Payments to creditors (cash/cheques) XX Balance b/d XX
Discounts Received XX Credit Purchases XX
Returns out XX Interest charged by creditors XX
Set-off XX Refund by creditors XX
Balance c/d XX
XX XX

Balance b/d XX