May 28, 2022

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CONTROL ACCOUNT

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CONTROL ACCOUNT 

Control account is also called total account. It is define as the aggregate of all the balances in a particular class of ledger. There are three classes of ledger. There are sales ledger, purchases ledger and general ledger.
There is usually a control account for sales ledger and purchases ledger. There is also control account for certain items in the general ledger. Control account is a memorandum account and therefore, it is not part of the double entry principle.

TYPES OF CONTROL ACCOUNT

There is majorly two types of control account. Purchase ledger control account also called Total account payable control account and sales ledger control account also called Total account receivables control account.

SOURCE OF INFORMATION FOR SALES LEDGER CONTROL ACCOUNT

The items posted to the sales ledger control account not taken from the there corresponding ledger account. They are collected from their subsidiary books. For sales ledger control account, the information is collected from the totals of sales day book, memorandum column of the cash book, and few from ledger account balances.

ITEMS                                                           SOURCE OF INFORMATION

Opening and clossing balances                       Sales ledger balances

On the debit side

Credit sales                                                         Sales Daybook

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Dishonoured cheques                                       Cash book

Bad debts recovered                                         General Journal

Interest on debts                                               General Journal

Cash redundant                                                  General Journal

On the credit sides

Return Inwards                                              Return inwards Daybook

Receipt from debtors (Cash/ Bank)               Cash book

Bad debts                                                           General Journal

Discount allowed                                              Cash book

Set-off                                                                 Sales ledger

READ ON  Similarities and Differences between Book Keeping and Accounting

SOURCES OF INFORMATION FOR PURCHASES LEDGER CONTROL ACCOUNT

The table below shows the sources of information from purchases ledger control account.

ITEMS                                                        SOURCES OF INFORMATION

Opening and closing balances                       Purchases ledger

On the debit side

Payments to creditors (cash/bank)                 Cash book

Return outwards                                         Return outwards Daybook

Discount Received                                              Cash book

Set-off/Contra                                                     Purchases ledger

On the credit side          

Credit purchases                                                Purchases Daybook

Cash refund                                                         Cash book

READ ON  LEDGER AND ACCOUNTS

IMPORTANCE OF CONTROL ACCOUNT

1. IT AIDS THE WORK OF THE EXTERNAL AUDITOR

Instead of carrying out seperate verification, the auditor can rely on the control account to verify the ledger accounts.

2. CONTROL PURPOSES

The control account is usuallu prepared by a different accountant. The other accountant prepares the ledger accounts. This will aid control of the accounting system in the business.

3. FRUAD CONTROL

Control account can be used to detect when fraud occurs in the business. It can also be used to trace the fraud to the actual thief.

4. LOCATION OF ERRORS

The control account can be used to locate errors that affects trial balance. Inmediately the errors are detected, the figure is posted to the suspense account.

5. FINANCIAL STATEMENT

Control account contains totals or aggregates of related transactions, therefore, items in it can be used to prepare a financial statement.

6. INCOMPLETE RECORDS

The control account can be used to find incomplete records. Were a business do not have a complete accounting system, control account can be used to find the remaining items needed to prepare the financial statement.

Further reading

Errors affecting trial balance.

Errors that do not affects trial balance.

Accounts and its types.

The word impracticable and IFRS.

Globalization-Its implications for small business.

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