Control Accounts

Definition
Control accounts, also known as total accounts, are used to represent numerous
individual accounts in certain ledgers.

Whatever is done in the individual accounts must also be done in the control
accounts representing those accounts, on the same side, but in total.

Main uses of Control Accounts

1. To help prevent and/or detect errors in the books.
2. To assist with the speedy preparation of the trial balance.
3. To assist with the preparation of final accounts from incomplete records.
4. To help prevent fraud by book-keepers
5. To help prove that the entries in the individual accounts and their final balances are
correct.

Main types of Control Accounts

1. The Sales Ledger Control Accounts or Total Debtor Account
2. The Purchase Ledger Control Account or Total Creditor Account

The Sales Ledger Control Account

This represents an overall picture of all the individual debtors’ accounts in the sales
ledger. Normally, the sales ledger control account carries a debit balance, but there are
instances where it can have a credit balance as well:

1. Where a customer returns goods after paying for them in full

2. Where a customer makes advance payment(s) on his account
3. Where a customer is overcharged
4. Where a customer overpays his account in error

The Purchases Ledger Control Account

This is used to represent an overall picture of the individual creditors’ accounts in the
purchases ledger. Normally, the purchase ledger control account carries a credit
balance. However, there are cases where it can also carry a debit balance:

1. Where the firm returns goods after paying for them in full
 2. Where the firm makes advanced payment(s) on its accounts
3. Where the firm has been overcharged
4. Where the firm overpays its account in error

The following items should not be entered in the control accounts

1. Trade discounts (not to be entered in any account)

2. Cash sales and/or cash purchases
3. Returns from cash sales and/or cash purchases
4. Provision for bad(or doubtful) debts
5. Provision for discount on debtors
6. Provision for discount on creditors

Set-Off
There are times when the same firm is both a supplier and a customer and inter
indebtedness (one balance is used to cancel all, or part of another) takes place, this is
known as a set-off. A set-off is also a contra settlement. A set-off between the sales
ledger and the p[purchases ledger will appear on the debit of the purchases ledger
control account and on the credit side of the sales ledger control account.

Items relating to the Sales Ledger Control Account

1. Opening balances
2. Total credit sales for the period
3. Total returns by credit customers (sales returns and allowances)
4. Cash and cheques received from customer (debtors)
5. Cash discounts allowed to credit customers
6. Customers’ cheques dishonoured (cheques marked refer to drawer)
7. Cash refunded to customers
8. Interest charged on overdue sales ledger (debtors) accounts
9. Bad debts written off
10. Bad debts recovered
11. Set-off (contra-settlement) between debtors and creditors
12. Bills receivables received
13. Bills receivable dishonoured
14. Interest charged on bills receivables dishonoured
SPECIMEN
Sales ledger Control Account/Total Debtors Account
$ $
Debit Balances b/f XX Credit Balances b/f XX
Sales Journal XX Returns Inwards Journal XX
Bank: Dishonoured Cheques XX Cash book (including amounts for XX
bad Debts recovered)
Cash/Bank: refunds to customers XX Discounts Allowed XX
Interest Charged on Overdue XX Bad Debts written off XX
debts
Bad debts recovered XX Set-off: Purchases Ledger XX
Bills receivable Dishonoured XX Bills Receivable Received XX
Interest Charged on Bills XX Balances c/d XX
Dishonoured
Balances c/d XX
XX XX
Balance b/d XX Balance b/d XX

Items relating to the Purchases Ledger Control Account

1. Opening balances
2. Total credit purchases for the period
3. Total returns to credit suppliers (purchases returns and allowances)
4. Cash and cheques paid to supplier (creditors)
5. Cash discounts received from credit supplier
6. Cheques paid to supplier but later cancelled
7. Petty cash paid to suppliers
8. Cash refunded by supplier
9. Interest charged by suppliers (creditors) on overdue accounts
10. Set-off (contra-Settlement) between debtors and creditors
11. Bills payable issued
12. Bills payable dishonoured
13. Interest charged on bills payable dishonoured
SPECIMEN
Purchases Ledger Control Account/Total Creditors Account
$ $
Debit Balances b/f XX Credit Balances b/f XX
Returns Outwards Journal XX Purchases Journal XX
Cash book XX Bank: Cancelled Cheques XX
Petty Cash Book XX Cash/Bank: Refunds from XX
Suppliers
Discount received XX Interest charged by Supplier XX
Set- off: Sales Ledger XX Bills Payable Dishonoured XX
Bills Payable Issued XX Interest Charged on Bills XX
Dishonoured
Balances c/d XX Balances c/d XX
XX XX
Balance b/d XX Balance b/d XX
 1. From the following balances, prepare the purchase and sales ledger control accounts:

Jan 1 Purchases ledger balances 3 200

Sales Ledger balances 4 720

TOTALS FOR THE YEAR

Purchases Journal 8 550
Sales Journal 9 360
Returns Outwards Journal 150
Cheques paid to suppliers 210
Petty cash paid to suppliers 30
Cheques and cash received from customers 7 945
Discount allowed 105
Discounts received 200
Bad debts witten off 130
Cash sales 2 000
Cash purchases 1 500
Balances on the sales ledger set-off against
balances in the purchases ledger 550

2. The trial balance of Queen and Square Ltd. revealed a difference in the books. In order that the
error(s) could be located, it was decided to prepare purchases and sales ledger control accounts.

From the following balances, prepare the control accounts and show where an error may have been made.

Jan 1 Purchases ledger balances 11 874

Sales Ledger balances 19 744

TOTALS FOR THE YEAR

Purchases Journal 154 562
Sales Journal 199 662
Returns Outwards Journal 2 648
Returns Inwards Journal 4 556
Cheques paid to suppliers 146 100
Petty cash paid to suppliers 78
Cheques and cash received from customers 185 960
Discount allowed 5 830
Discounts received 2 134
Bad debts witten off 396
Customers’ cheques dishonoured 30
Balances on the sales ledger set-off against
balances in the purchases ledger 1 036

Dec 31 The list of balances form the purchase ledger shows a total of $14 530 and that of
the sales ledger a total of $21 658.
 3. The following information was provided by Gender Enterprises and represented records on the
books for the month of October 2002.
$
October 1 Purchases Ledger debit balances 7 800
Sales Ledger debit balances 7 500
Sales Ledger credit balances 45

October 31 Total cheques paid to suppliers 55 050

Total cash received from debtors 300
Total cheques received from debtors 9 750
Credit Sales for the month 9 075
Discounts received from suppliers 1 350
Purchases as per purchases journal 67 500
Returns outward journal 1 125
Bad debts written off 525
Dishonored cheques 53
Sales returns 180
Discounts allowed 360
Sales Ledger debit balances at end of month 6 721
Sales Ledger credit balances at end of month 1 253

(a) (Use correct headings)

(i) Prepare the Sales Ledger Control Account (9 marks)

(ii) Prepare the Purchases Ledger Control Account (9 marks)

(b) State ONE reason why the Sales Ledger Control Account has BOTH debit and credit balances.
(1 mark)

(c) State ONE benefit of Control Accounts. (1 mark)

4. Maurice Deleon operates an Electrical Supplies business. He has a large number of debtors and
creditors and maintains both Debtors and Creditors Control Accounts. The following information
was taken from his books in July 2001 and represent totals for the month ending July 31, 2001.
.

$
Returns outwards 900
Discount received 2 610
Cheques paid to suppliers 52 500
Purchases journal 47 250
Cheques from customers dishonoured 2 100
Returns inwards 1 500
Discounts allowed 750
Bad debts written off 1 125
Amounts received from customers 21 300
Credit sales to customers 30 150

July 1, 2001 balances were:

Purchases ledger debit balance 2 775

Purchases ledger credit balance 37 500
Sales ledger debit balance 9 150
Sales ledger credit balance 450

(a) Prepare Maurice Deleon’s Debtors Control Accounts and Creditors Control accounts for July
2001. ( 16 marks)

(b) Give TWO advantages of maintaining Control Accounts. (2 marks)

(c) George Mota is a customer who owes $1 500. If, because of misfortune, he is only able to pay
60% of that amount to Maurice Deleon, what effect would this have on the Control Account?
(2 marks)

Use the relevant information from the data below to prepare EITHER accounts OR statements to show the
amount for total purchases and sales for the project.

May 30, 2005 May 30, 2006

$ $
Debtors 3 219 3 388
Creditors 1 842 1 891
Cash received from debtors 24 264
Cash paid to creditors 18 624
Cash purchases 5 780
Cash sales 12 20
2013 # 2

(a) The table below shows sources of the Debtors Ledger Control Accounts.

es of Information of Original Entry

efund to debtors Cash book
ishonoured cheques
redit sales
eturns inwards
ts from debtors
iscount allowed
ad debts

Copy the table in your answer booklet and complete it to show the Book of Original Entry
for EACH source of information. An example is given.
(6 marks)

L Somerset presented the following information for the month of October 2012:

$
ors Ledger Control account credit balance b/d 25 400
ors Ledger Control account debit balance b/d 1 450
s Outwards 1 200
ses for the quarter 123 900
nts to creditors 100 300
d by cheque from creditor due to damaged item 1 180
nts received 2 500
e returned by creditor – presented too late to bank 3 300
amount between debtors ledger and creditors ledger 620
ed from creditor due to overpayment 284

(b) Prepare the Purchases Ledger Control Account for L. Somerset for the month of October 2012
2014 #2

1. JT Enterprises, whose purchases and sales are all on credit, prepares Control Accounts at the end of
every month.
At the end of April 2014, JT Enterprises provided the following information on its accounts payable and its
accounts receivable.

Accounts Payable
$
Opening balances 5 100 (Cr.), $310 (Dr.)
Purchases for the month of April 63 720
Purchases returns 620
Payments to suppliers 59 970
Discounts received 1 200
Late payment charge 45
Closing balance 270

Accounts Receivable
$
Opening balances 9 360 Dr.), $470 (Cr.)
Sales for the month of April 87 890
Sales returns 1 330
Receipts from customers 69 110
Discounts allowed 1 200
Bad debts 1 320
Customer’s cheque returned 970
Closing balance 550

Note: A firm, Escrow Ltd, is a supplier and a customer of JT Enterprises. At 30 April, Escrow
Ltd’s balances in the ledgers of JT Enterprises were as follows:

Purchases Ledger $ 1 050

Sales Ledger $ 375

The firm sets off the appropriate amount through the Control Accounts.

(a) State ONE reason why Control Accounts would be useful to JT Enterprises. (1 mark)

(b) Prepare the following Accounts for JT Enterprises:

(i) Purchases Ledger (Accounts Payable) Control Account (8 marks)

(ii) Sales Ledger (Accounts Receivable) Control Account (11 marks)