Control

Accounts
Total accounts
Prepared by:
Amna Waheed
Control accounts
 If the trial balance fails to balance and the error cannot be readily located, it is
necessary to check all the accounting records.
 This can take a considerable amount of time. The checking process can be speeded
up if a control account for the sales ledger (which contains the accounts of the
debtors) and a control account for the purchases ledger (which contains the
accounts of the creditors) have been prepared.
 These accounts act as a check on the individual accounts within these ledgers.

 Like the trial balance, however, these accounts can only check the arithmetical
accuracy: errors such as omission and commission will not be revealed by a
control account.
Control accounts
 Not a part of double entry system.

 Prepared in the General Ledger.

Benefits of control accounts
• They can assist in locating errors when the trial balance fails to balance.
• They are proof of the arithmetical accuracy of the ledgers they control.
• The balances on these accounts are regarded as being equal to the total of the trade
receivables and the total of the trade payables, so this information is available immediately.
• Draft financial statements can be prepared quickly because of the balances provided by
the control accounts.
• They help to reduce fraud as the control accounts are prepared by someone who has not
been involved in making the entries in those particular ledgers.
• They provide a summary of the transactions affecting the trade receivables and trade
payables for each financial period.
 Control
Accounts

Sales Ledger Control Account/ Purchases Ledger Control Account/

Total Account Receivable account Total Account Payable account
 Sales Ledger Control Account/Total Account
Receivable Account
Date Details $ Date Details $
  Balance b/d XXX Balance b/d* X
Sales (credit sales) XXX Sales Return (credit sales return) XX
 
Cash/Bank (payment received
Bank (dishonoured cheque)
  XX from customers) XXX
Bank/Cash (refunds of over Discount Allowed
  payment) XXX XX
Interest/Interest payable (Interest
Irrecoverable debts
charged on overdue account) XX XX
 
Purchases ledger (set-off
purchases/inter ledger
  transfer/contra) XX
 
Balance c/d* X Balance c/d XXX
   

  XXXX XXXX
   

Balance b/d XXX   Balance b/d* X

 

* Credit balance of Account receivables.

Sales Ledger Control Account/Total Account
Receivable Account (LIST OF SOURCES)
Date Details $ Date Details $
  Balance b/d XXX Balance b/d* X
Sales (Sales day book) Sales Return (Sales return day
  XXX book) XX
Bank (D.C- Cash book) XX Cash/Bank (Cash book) XXX
 

Bank/Cash (refunds- Cash book) XXX Discount Allowed (Cash book) XX

 

Interest/Interest payable (General Irrecoverable debts (General

Journal) XX Journal) XX
 
Purchases ledger (set-off
purchases/inter ledger
  transfer/contra) XX
 
Balance c/d* X Balance c/d XXX
   

  XXXX XXXX
   

 
Balance b/d XXX   Balance b/d* X

* Credit balance of Account receivables.

 Purchases Ledger Control Account/Total Account Payables
Account
Date Details $ Date Details $
 
Balance b/d* X Balance b/d XXX
Purchases Return (credit purchases
Purchases (credit purchases)
 
return) XX XX
Interest/Interest payable (Interest
Cash/Bank (payment to suppliers) charged on overdue account)
  XXX XX
Bank/Cash (refunds of over
Discount received payment)
  XX XX
Sales ledger (set-off sales/inter
ledger transfer/contra)
  XX  
Balance c/d XXX Balance c/d* X
 
     

  XXXX XXXX
     

 
Balance b/d* X   Balance b/d XXX

* Debit balance of Account Payables.

 Purchases Ledger Control Account/Total Account
Payables Account (LIST OF SOURCES)
Date Details $ Date Details $
 
Balance b/d* X Balance b/d XXX
Purchases Return (Purchases return
Purchases (Purchases day book)
 
day book) XX XX
Interest/Interest payable (General
Cash/Bank (Cash book) Journal)
  XXX XX
Discount received (Cash book) Bank/Cash (refunds- Cash book)
  XX XX
Sales ledger (set-off sales/inter
ledger transfer/contra)
  XX  
Balance c/d XXX Balance c/d* X
 
     

  XXXX XXXX
     

 
Balance b/d* X   Balance b/d XXX

* Debit balance of Account Payables.

Contra entries/Set offs/Inter-ledger transfers

It happens when a business sells goods to, and also buys goods from, the
same trader/business.
 Here the same entity is both a supplier and a customer at same time and inter-indebtedness is
set off.

 Example
 On 1 June John sells $500 of wood to Raj.
 On 10 June John buys 1 chair from Raj for $350.
 In this case, Raj will have an account in both the sales ledger and purchases ledger of John.
 The $350 owing by Raj is set off against $500 owing to him.
 This leaves $150 owing to Raj.
 Contra entries/Set offs/Inter-ledger transfers

Shweta provided the following information:

20–8
May 15 Sold goods, $190, on credit to Mansingh Road Stores
22 Bought goods, $320, on credit from Mansingh Road Stores
30 The balances of the two accounts for Mansingh Road Stores were set-off and
Shweta sent a cheque for the remaining balance.

Record these transactions in the account for Mansingh Road Stores in the sales ledger and the account for Mansingh Road
Stores in the purchases ledger.

Shweta Shweta
Sales Ledger Purchases Ledger
Mansingh Road Stores Account Mansingh Road Stores Account
Date Details $ Date Details $ Date Details $ Date Details $
2021 2021 2021 2021
May May May
May 15 Sales 190 30 Purchases ledger 190 30 Sales ledger 190 22 Purchases 320
          Bank 130    
    190   190     320   320
Tips related to Control Account
• Note: You do not enter the total of the balances from the sales ledger in the control account. Instead, you
balance-off the control account and check whether the balance c/d is the same as the total of all the
individual balances in the sales ledger.
• If the balance is not the same as the total of all the balances in the sales ledger, there is an error either in
the totals entered in the control account from the books of original entry or, more likely, somewhere in
the sales ledger.
• Like a trial balance, if the totals of a control account are not equal and the entries made to it were
correct (i.e. the amounts transferred to it from the books of original entry have been correctly summed),
this shows that there is an error somewhere in the ledger.
• We will have to check the purchases ledger in detail to find the error. A double line has not yet been
drawn under the totals. We will do this (known as 'ruling off the account') when the error has been
found and the totals corrected.
• Note: You need to be sure that the totals transferred from the books of original entry were correct
before assuming that an out-of-balance control account means that the ledger is incorrect.