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Control Account Notes

Control accounts are used to check for errors in the purchases and sales ledgers. The sales ledger control account is balanced by debiting opening balances, credit sales, cash/cheques received, and crediting returns, cash/cheques received, and closing balances. Any difference would indicate a mistake. Similarly, the purchases ledger control account balances purchases, returns, cash/cheques paid against opening and closing credit balances. A difference of $40 in the purchases ledger control account shows a mistake in the purchases ledger. Control accounts obtain their information from documents like the cash book, sales and purchases day books, and listings of debtors and creditors.

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Nipuni Perera
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189 views

Control Account Notes

Control accounts are used to check for errors in the purchases and sales ledgers. The sales ledger control account is balanced by debiting opening balances, credit sales, cash/cheques received, and crediting returns, cash/cheques received, and closing balances. Any difference would indicate a mistake. Similarly, the purchases ledger control account balances purchases, returns, cash/cheques paid against opening and closing credit balances. A difference of $40 in the purchases ledger control account shows a mistake in the purchases ledger. Control accounts obtain their information from documents like the cash book, sales and purchases day books, and listings of debtors and creditors.

Uploaded by

Nipuni Perera
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Prepared by D.

El-Hoss
Adapted from F. Wood Book-keeping

Control Accounts
Need for control accounts

As all accounts are kept in different ledgers then it is more likely that a mistake will
occur when a Trial Balance is drawn up. In addition as the ‘T’ accounts are kept in
different ledgers mistakes are very often hard to locate.

As a result accountants use Control Accounts to check whether errors have occurred in
the Purchases Ledger or the Sales Ledger. The control account acts as a type of Trial
Balance for each ledger.

Form of control accounts

1- Sales Ledger Control Account

$
st
Sales Ledger Debit balances on 1 January 20X8 1,894
Total credit sales for the month 10,290
Cheques received from customers in the month 7,284
Cash received from customers in the month 1,236
www.igcseaccounts.com
Returns inwards from customers during the month
Debit balances on the 31st January 20X8 as extracted from the sales ledger
296
3,368

Dr Sales Ledger Control Account Cr

20X8 $ 20X8 $
Jan 1 Balances b/d 1,894 Jan 31 Bank 7,284
Jan 31 Sales 10,290 Cash 1,236
Returns Inwards 296
Balances c/d 3,368
12,184 12,184

In this case the Sales Ledger Control Account has proven that there is no error in the
Sales Ledger because the balance c/d in the Sales Ledger is the correct figure that
balances with the other entries made in the various day books.

www.igcseaccounts.com
Prepared by D. El-Hoss
Adapted from F. Wood Book-keeping

2- Purchases Ledger Control Account

$
st
Purchases Ledger Credit balances on 1 January 20X8 3,890
Cheques paid to suppliers during the month 3,620
Returns outwards to suppliers in the month 95
Purchases from suppliers in the month 4,936
Credit balances on 31st January as extracted from the purchases ledger 5,151

Dr Purchases Ledger Control Account Cr

20X8 $ 20X8 $
Jan 31 Bank 3,620 Jan 1 Balances b/d 3,890
Jan 31 Returns Outwards 95 Jan 31 Purchases 4,936
Jan 31 Balances c/d 5,151
8,866 8,826*

* This difference between the Balance c/d from the Purchases Ledger and the other
entries is $40. This proves there is a mistake somewhere in the Purchases Ledger.

Information for control accounts

www.igcseaccounts.com
The following tables show where information is obtained from to draw up control
accounts.
Sales Ledger Control Source
1 Opening debtors (Bal b/d) List of debtors drawn up at end of previous period
2 Credit sales Total from Sales Day Book
3 Returns inwards Total from Returns Inwards Day Book
4 Cheques received Cash Book: Bank column on received side (Dr)
5 Cash received Cash Book: Cash column on received side (Dr)
6 Closing debtors (Bal c/d) List of debtors drawn up from the Sales Ledger

Purchases Ledger Control Source


1 Opening Creditors (Bal b/d) List of creditors drawn up at the end of previous
period
2 Credit purchases Total from purchases day book
3 Returns Outwards Total of returns outwards day book
4 Cheques paid Cash book: bank column on payments side (Cr)
5 Cash paid Cash Book : Cash column on payments side (Cr)
6 Closing Creditors (Bal c/d) List of creditors drawn up from the Purchases Ledger

www.igcseaccounts.com

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