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Control Account: An Account Which Checks The Arithmetical Accuracy of A Ledger. Control

Control accounts are ledger accounts used to check the accuracy of subsidiary ledgers. They record the total balances of accounts in related subsidiary ledgers. There are control accounts for trade receivables and trade payables ledgers. Control accounts help verify accuracy, detect errors, prevent fraud, and provide management with total receivables and payables balances. They allow for cross-checking between ledgers. Credit or debit balances in control accounts can indicate overpayments, returns, or other discrepancies requiring investigation.

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59 views

Control Account: An Account Which Checks The Arithmetical Accuracy of A Ledger. Control

Control accounts are ledger accounts used to check the accuracy of subsidiary ledgers. They record the total balances of accounts in related subsidiary ledgers. There are control accounts for trade receivables and trade payables ledgers. Control accounts help verify accuracy, detect errors, prevent fraud, and provide management with total receivables and payables balances. They allow for cross-checking between ledgers. Credit or debit balances in control accounts can indicate overpayments, returns, or other discrepancies requiring investigation.

Uploaded by

Nasif Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CONTROL ACCOUNT

Control account: An account which checks the arithmetical accuracy of a ledger. Control
accounts are used to record the balances on a number of subsidiary accounts and to provide a
cross-check on them.

Types of control accounts:


1. Trade receivables ledger control account (Total debtors account).
2. Trade payables ledger control account (Total creditors account).

 State two advantages of preparing a trade receivables (total debtors) control account
 Verifies the arithmetical accuracy of the trade receivables ledger
 Assists in the prevention of fraud
 Provides management with total trade receivables
 Helps in the preparation of the statement of financial position
 Detects errors in individual ledgers

 State two reasons why it is possible to have a credit balance in a trade receivables
control account.
 An overpayment by a credit customer
 The credit customer returned goods after paying the account
 The credit customer paying in advance for the goods
 Cash discount not being deducted before payment was made

 Suggest two possible reasons for a debit balance in the trade payables Control
Account.
 Goods returned after payment made
 Discount received not posted
 Overpayment to supplier
 Contra from trade receivables ledger
 Evaluate the use of control accounts.
Positive
 Tests (verifies) arithmetical accuracy
 Helps to identify areas where errors exist
 Through separation of duties protects against fraud
 Provides total of trade payables or trade receivables.
Negative
 Time consuming
 Requires double entry accounting and a high level of staff skill
 Some errors are not discovered by control accounts e.g. errors of omission.

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IAS UNIT 1 |2020|ACCOUNTING|MAHDI SAMDANI


 Explain how a contra entry (set off) between the trade receivables ledger and trade
payables ledger can arise.
A contra entry can arise when a customer is also a supplier of the business. Instead of the
customer paying us for goods supplied their balance is offset against the amount owing to
them for good or services supplied.

Formats:

Trade receivables ledger control account

Date Details £ Date Details £


Balance b/d (debit balance) *** Balance b/d (credit balance)* ***
Sales day book (credit sales) *** Cashbook (cash/bank) ***
Bank (Dishonoured cheque) *** Cashbook (Discount allowed) ***
Cash (Refund) *** Return inwards day book ***
Journal (Interest charged) *** Journal (Irrecoverable debts) ***
Journal (Contra) ***
Balance c/d (credit balance) *** Balance c/d (debit balance) ***
**** ****
Balance b/d *** Balance b/d* ***

Trade payables ledger control account

Date Details £ Date Details £


Balance b/d (debit balance)* *** Balance b/d (credit balance) ***
Purchases day book (credit
Cashbook (cash/bank) *** ***
purchases)
Cashbook (Discount received) *** Cash (Refund) ***
Return outwards day book *** Journal (Interest charged) ***
Journal (Contra) *** Balance c/d (debit balance) ***
Balance c/d (credit balance) ***
**** ****
Balance b/d* *** Balance b/d ***

MAHDI SAMDANI, Accounting Course Instructor. MBA, BBA (Accounting)


IGCSE & IAL (O&A LEVEL) EDEXCEL/CAMBRIDGE.
Contact: 01673869920.
E mail: mahdi.samdani007@gmail.com, ms12_acc@yahoo.com
Website: mahdisamdaniaccounting.com

Page 2 of 2
IAS UNIT 1 |2020|ACCOUNTING|MAHDI SAMDANI

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