DDWG 2523

FINANCIAL
ACCOUNTING II

CHAPTER 1- CONTROL
ACCOUNTS
 Course Outline
• The Purpose of Control Accounts
• Preparation And Item of Sales Ledger
Control Account
• Preparation And Item of Purchases Ledger
Control Account

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Introduction
• A control account is a memorandum
account.
• It is not part of the double entry system.
• It will be prepared either in the general
ledger or in the ledger to which it relates
( purchased ledger or sales ledger )

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Purpose of Control Accounts
• To facilitate the location of errors highlighted in
the trial balance by pinpointing the personal ledger
in which these errors are likely to be found.
• To deter fraud and the misappropriation of fund.
• To provide a check on the accuracy of the ledger to
which it is relates.

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Division of The General Ledger

1. Personal ledgers:
(A) sales/trade receivables ledger – contains credit
customers’ personal accounts;
(B) purchases/trade payables ledger – contains credit
suppliers’ personal accounts.

2. Impersonal ledger – contains all other accounts.

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Control Accounts
• The sales ledger control account can also be
known as the debtors’ control account or the total
accounts receivable account.
• The purchase ledger control account can also be
known as the creditors’ control account or the total
accounts payable account.

DDWG 2523 - Nurul Hizetie Mohamed Nor

THE SALES LEDGER CONTROL
ACCOUNT
 The Sales Ledger Control Account

DDWG 2523 - Nurul Hizetie Mohamed Nor

 The Purchase Ledger Control Account

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Information For The Sales Ledger
Control Account

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Information For The Purchase Ledger
Control Account

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Sales Ledger Control Account

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Sales Ledger Control Account (Continued)

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Purchase Ledger Control Account

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Purchase Ledger Control Account
(Continued)

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Other Control Account Transactions

Other transactions that will have to be recorded in the

control accounts include:

• Bad debts that we have written-off.

• Contra entries, where we owe and are owed money to
one business, and the net amount is paid over to or
from that business.

DDWG 2523 - Nurul Hizetie Mohamed Nor

 ACTIVITY
How should the following be recorded?

(A)The business has sold a hughes £600 goods.

(B) Hughes has supplied the business with £880 goods.
(C) The £600 owing by hughes is set off against £880
owing to him.
(D)This leaves £280 owing to hughes.

DDWG 2523 - Nurul Hizetie Mohamed Nor

 ACTIVITY (CONTINUED)

DDWG 2523 - Nurul Hizetie Mohamed Nor

 Reconciliation Of Control Accounts

• Each control account must reconcile to its ledger, so

the balance of the sales ledger control account must
equal the total of the balances on the sales ledger and
so on.
• Where a control account cannot be reconciled, the
discrepancy must be investigated, identified and
amended.

DDWG 2523 - Nurul Hizetie Mohamed Nor

 The Location And Correction of Errors
Using Control Accounts

• An error in a book of prime entry will result in an error in the

relevant control account and the nominal account containing
the double entry (e.g. Under or overcast total of a day book).
• It may also result in an error in the relevant personal ledger
(e.g. The amount of an invoice entered incorrectly in a day
book).
• An error in a personal account will not affect the control
account.

DDWG 2523 - Nurul Hizetie Mohamed Nor

 REFERENCE

 THOMAS, A., & WARD, M. A. (2015).

INTRODUCTION TO FINANCIAL ACCOUNTING.
(8TH EDITION). MC GRAW HILL EDUCATION.

 WOOD, F. & SANGSTER, A. (2012). BUSINESS

ACCOUNTING 1. (12TH EDITION). PEARSON.

DDWG 2523 - NURUL HIZETIE MOHAMED NOR

 THANK YOU

DDWG 2523 - Nurul Hizetie Mohamed Nor