14 Control Accounts
Control accounts: memorandum accounts containing totals of all individual transactions from TP in
purchases ledger and TR in sales leger to ensure their accuracy.
Memorandum accounts: ledger accounts not regarded as part of main double entry system though they
are produced using double-entry principles. They only contain totals of part of accounting system to
check accuracy.
- Made at year-end using totals from books of prime entry
- Totals of control accounts should = balances of ledger it controls. So they are compared,
reconciled and any errors corrected.
Advantages:
1. arithmetical check on bookkeeping accuracy (ensures reliability of TP and TR figure)
2. easier preparation of financial statements summary of part of accounting system it controls- providing
one balancing figure in trial balance for TP and TR
3. improves internal control, reducing the chances of fraud.
4. helps find missing figures in case of incomplete records
Disadvantages:
1. not all errors show up, not completely accurate
2. costly- requires professional with specialist accounting knowledge
Sales ledger control account: a summary of all transactions related to credit customers.
Debit (increases what customer owes) Credit
- Bal b/d - Sales returns --- journal
- Sales (sales commission not included) --- - Discount allowed --- cashbook
sales journal - Bank/receipts --- cashbook
- Dishonored/returned cheques --- - Irrecoverable debts --- journal
cashbook - Contras --- journal
- Interest charged --- journal
Purchases ledger control account: a summary of all transactions related to credit suppliers.
Debit (reduces what is owed) Credit:
- Purchases returns --- journal - Bal b/d
- Discount received --- cashbook - Purchases --- purchases journal
- Bank/payments --- cashbook - Dishonoured/returned cheques ---
- Contras --- journal cashbook
- Interest charged --- journal
Sales ledger can have credit balance and purchases ledger debit:
- Overpaying sales/purchases invoice
Control accounts: memorandum accounts containing totals of all individual transactions from TP in
purchases ledger and TR in sales leger to ensure their accuracy.
Memorandum accounts: ledger accounts not regarded as part of main double entry system though they
are produced using double-entry principles. They only contain totals of part of accounting system to
check accuracy.
- Made at year-end using totals from books of prime entry
- Totals of control accounts should = balances of ledger it controls. So they are compared,
reconciled and any errors corrected.
Advantages:
1. arithmetical check on bookkeeping accuracy (ensures reliability of TP and TR figure)
2. easier preparation of financial statements summary of part of accounting system it controls- providing
one balancing figure in trial balance for TP and TR
3. improves internal control, reducing the chances of fraud.
4. helps find missing figures in case of incomplete records
Disadvantages:
1. not all errors show up, not completely accurate
2. costly- requires professional with specialist accounting knowledge
Sales ledger control account: a summary of all transactions related to credit customers.
Debit (increases what customer owes) Credit
- Bal b/d - Sales returns --- journal
- Sales (sales commission not included) --- - Discount allowed --- cashbook
sales journal - Bank/receipts --- cashbook
- Dishonored/returned cheques --- - Irrecoverable debts --- journal
cashbook - Contras --- journal
- Interest charged --- journal
Purchases ledger control account: a summary of all transactions related to credit suppliers.
Debit (reduces what is owed) Credit:
- Purchases returns --- journal - Bal b/d
- Discount received --- cashbook - Purchases --- purchases journal
- Bank/payments --- cashbook - Dishonoured/returned cheques ---
- Contras --- journal cashbook
- Interest charged --- journal
Sales ledger can have credit balance and purchases ledger debit:
- Overpaying sales/purchases invoice
