Financial Accounting 2
(BM020-3-1)
Control Accounts
Learning Outcomes
To define control accounts
The purpose of control accounts.
The main types of control accounts.
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Uses of Control Accounts
A control account is so called because it controls a
section of the ledger.
For example, a sales ledger control account controls
the sales ledger; a purchase ledger controls the
purchase ledger.
If 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 ledgers.
Control accounts are kept in the general ledger.
BM020-3-1-Financial Accounting 2
Purpose of Control accounts
To act as independent checks on the arithmetical
accuracy of the balances in the sales and purchase
ledgers.
An added advantage of keeping control accounts in
that they can act as mini trial balances, since they
are summary accounts.
To identify ledgers in which errors have been made
when there is a difference on a trial balance.
BM020-3-1-Financial Accounting 2
Purpose of Control accounts (cont)
To act as an independent internal check
on the work of the sales & purchase
ledger clerks, to detect errors or fraud.
Duties should be divided where the person
keeping the sales or purchase ledgers will
not have access to the control account in
the general ledger.
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Form of Sales Control Account
Sales Day Book/Sales Journal
Sales ledger
(customers account)
General ledgers
Sales ledger control
account
BM020-3-1-Financial Accounting 2
Sales account
Sales Ledger Control Account
(Accounts Receivable Control A/C)
Sales ledger:
Ali
Jan 8 Sales 1600
Chew
Jan 19 Sales 1000
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Baba
Jan 15 Sales 2500
Elan
Jan 26 Sales 3500
General ledger:
Sales Account
2009
Jan 31 Credit sales for
month
BM020-3-1-Financial Accounting 2
8,600
General ledger:
Sales Ledger Control Account
2009
Jan 1
Jan 31
2009
Balance b/d
Sales
Feb 1 Balance b/d
BM020-3-1-Financial Accounting 2
1,600
8,600
10,200
10,200
Jan 31 Balance c/d 10,200
10,200
Sales Ledger Control
2009
Jan 1
Balance b/d
xxxx
Jan 31 Sales day book
xxxxx
(total of sales invoiced in the
period
xxxxx
BM020-3-1-Financial Accounting 2
2009
Jan 31
Returns inwards Day Book
(total of all goods returned from
debtors in the period)
xxx
Jan 31
Cash book
xxx
(total of all cash received from
debtors in the period)
Jan 31
Cash book
xxx
(total of all cheques received from
debtors in the period)
Jan 31
Balance c/d
xxx
xxxxx
Example 1 of Sales ledger control account data:
Debit balances on 1 January 2009
Total credit sales for the month
Cheques received from customers in the month
Cash received from customers in the month
Returns inwards from customers during the month
Debit balances on 31 January as extracted
from the sales ledger
Sales ledger control
BM020-3-1-Financial Accounting 2
1,894
10,290
7,284
1,236
296
3,368
Example 1 of Sales ledger control account data:
Debit balances on 1 January 2009
Total credit sales for the month
Cheques received from customers in the month
Cash received from customers in the month
Returns inwards from customers during the month
Debit balances on 31 January as extracted
from the sales ledger
1,894
10,290
7,284
1,236
296
3,368
Sales ledger control
2009
Jan 1 Balances b/d
Jan 31 Sales
1,894
10,290
12,184
BM020-3-1-Financial Accounting 2
2009
Jan 31
Jan 31
Jan 31
Jan 31
Bank
7,284
Cash
1,236
Return Inwards 296
Balances c/d
3,368
12,184
Information for sales ledger
control account
Exhibit 2.1 Source of information for sales ledger control account
BM020-3-1-Financial Accounting 2
Form of Purchase Control Account
Purchase Day Book/Purchase Journal
Purchase ledger
(creditors account)
General ledgers
Purchases Ledger control
account
BM020-3-1-Financial Accounting 2
Purchases account
Purchase Ledger control account
The total accounts payable account is
also referred to as the Purchase ledger
control account
The credit balance in this account in the
general ledger must always be equal to
the total of the credit balances of the
individual creditors accounts in the
purchases ledger at a particular point in
time.
BM020-3-1-Financial Accounting 2
Purchase Ledger Control Account
Purchase ledger:
Sow
Jan 3 Purchases 1,500
Rama
Jan 18 Purchases 10,000
BM020-3-1-Financial Accounting 2
Bob
Jan 10 Purchases 4,500
Tom
Jan 21 Purchases 4,000
General ledger
Purchase Ledger control account
20X9
Jan 31
Balance c/d
23,000
20X9
Jan 1 Balance b/d
Jan 31 Purchases
23,000
Purchases account
Jan 31 Sundry creditors
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23,000
3,000
20,000
23,000
Information for purchases
ledger control account
Exhibit 2.2 Source of information for purchases ledger control account
BM020-3-1-Financial Accounting 2
Question and Answer Session
Q&A
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Exercise
Frank Wood & Alan Sangster (2008)
Business Accounting 1, Eleventh edition,
Prentice Hall.
31.2A, 31.4A, 31.7A, 31.8A (pg 380 382)
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What we will cover next
Errors and Adjustment
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