CONTROL ACCOUNTS when

a business Enterprise grows in size, the volume of the transactions increases

necessitating the division of the ledger into different ledgers. Such ledgers may include
purchases ledger, sales ledger, private ledger and general ledger. For each of the sales
or purchases ledger, a kind of trial balance known as a purchases or sales ledger control
account is drawn at the end of each month. A control account can therefore be defined
as an account which checks the arithmetical accuracy of a particular ledger.
• It should be noted that control accounts are not part of the double entry system but
are simply memorandum accounts maintained for purposes of providing an internal
check on the accuracy of a particular ledger.
ADVANTAGES OF USING CONTROL ACCOUNTS.
• 1.They help in the location of errors. This is made possible because errors are localised
as each ledger is proved separately and it can easily be found out within which ledger an
error has occurred.
• 2. Control accounts enable management to detect fraud and discrepancies. For instance,
if an accounts clerk in charge of a particular ledger makes some incorrect entries to
disguise fraud, control accounts disclose such effort. This is because the closing balance
of the control account will not tally with the total of the individual accounts in either the
sales or purchases ledger.
• 3. They serve as arithmetical proof for entries made in a particular ledger. If the closing
balance in the control account agrees with the sum of the individual debtors’ or
creditors' personal accounts, it is a proof that a particular ledger is arithmetically
accurate.
• 4. Control accounts provide a quick means of ascertaining the update amounts owing to
and by the business. This is because the balances in the control accounts are equal to
the total of the individual balances in the sales and purchases ledger.
• 5. They serve as a deterrent on careless work by employees since responsibility for
committing errors can be fixed to a particular accounts clerk. Efficient clerks can be
distinguished from the inefficient ones.
• 6.They facilitate division of labor among the different accounts clerks because the ledger
is subdivided and each sub division of the ledger is entrusted to a particular accounts
clerk. This enables the clerical work to be done efficiently and fast.
• 7. Control accounts not only help management to detect fraud and discrepancies but
also help to control them because different ledgers are kept by different accounts
clerk’s, hence the possibility of collusion among them to defraud the business is
minimised.

. SALES LEDGER CONTROL ACCOUNT.

This account is also referred to the Debtors Ledger Control Account. It is debited with the sum of
all the items, which have been debited in details to the individual personal accounts in the sales
ledger. Like wise, it is credited with the sum of all items, which have been credited to such accounts.
Note, the balance of the sales Ledger Control Account should therefore tally with the sum of all
balances appearing in the individual personal accounts in the sales ledger.
 The format of this account appears below:

SALES LEDGER CONTROL ACCOUN T.

Dr. Cr
• Opening • Opening
debit credit
balance balance(if
any)
• Total credit • Total cash
sales or
cheques
received
from
debtors
• Debtor's • Total
cheques returns
dishonoured inwards
• Refund to • Total
debtors discount
allowed
to debtors
• Interest • Total bad
charged to debts
Debtors for written
over due off
accounts
• Total bills • Total bills
receivable receivable
dishonoured from
customers
accepted
• Charges • Interest
made to ledger
Debtors for transfers
carriage, (contra
packages entries)
e.t.c
• Discount • Closing
allowed balance
dishonoured
• Closing
credit
balance (if
any)

Sources of information for sales ledger control account

 Item Source
Opening balance Schedule of debtor’s balances
drawn up at the end of the
previous accounting period.
Credit sales Total from sales journal
Sales returns Total from returns inwards
journal
Cheques received Bank column on debit side of
the cash book
Cash received Cash column on debit side of
cash book
Discount allowed Total of discount column on the
debit side of the cash book
Transfers (contras) General journal
Dishonoured cheques Bank column on credit side of
the cash book
Bad debts General journal
Any cheques to debtors General journal
Discount allowed withdrawn General journal
Closing balance Schedule of debtors' balances
drawn up at the end of the
accounting period.

Example 1

From the information given below open up appropriate ledger accounts and record the information in
the customers' personal accounts. Then prepare a sales ledger control account.

Date Particulars Aliba Alok Gabinga

20-8 Shs Shs Shs
June 1 Balance b/d 200,000 350,000 300,000
30 Credit sales 500,000 700,000 650,000
30 Returns inwards 60,000 40,000 55,000
30 Receipts(cheques) 400,000 600,000 500,000
30 Discount allowed 30,000 20,000 50,000

Dr. Aliba account. Cr

Date Details Fo Amount Date Details Fo Amount

20-8 Shs 20-8 Shs
June 1 Balance b/d 200,000 June 30 Returns 60,000
inwards
30 Sales 500,000 30 Bank 400,000
30 Discount 30,000
allowed
 30 Balance 210,000
c/d
700,000 700,000
July 1 Balance b/d 210,000

Dr.
Alok account. Cr

Date Details Fo Amount Date Details Fo Amount

20-8 Shs 20-8 Shs
June1 Balance 350,000 June 30 Returns 40,000
b/d inwards
30 Sales 700,000 30 Bank 600,000
30 Discount 20,000
allowed
30 Balance 390,000
c/d
1,050,000 1,050,000
July 1 Balance 390,000
b/d

Dr. Gabinga account. Cr

Date Details Fo Amount Date Details Fo Amount
20-8 Shs 20-8 Shs
June 1 Balance 300,000 June 30 Returns 55,000
b/d inwards
30 Sales 650,000 30 Bank 500,000
30 Discount 50,000
allowed
30 Balance 345,000
c/d
950,000 950,000
July 1 Balance 345,000
b/d

Dr. Sales ledger control account. Cr

Date Details Fo Amount Date Details Fo Amount
20-8 Shs 20-8 Shs
June 1 Balance 850,000 June 30 Returns 155,000
b/d inwards
30 Sales 1,850,000 30 Bank 1,500,000
30 Discount 100,000
allowed
 30 Balance 945,000
c/d
2,700,0000 2,700,000
July 1 Balance 945,000
b/d

The balance of shs 945,000 in the sales ledger control account is equal to the sum of the separate
debtor's personal account balances of Aliba shs 210,000, Alok shs 390,000 and Gabinga shs 345,000.

Purchases ledger control account

This account is also referred to the creditor's ledger control account. It is debited with the sum of all the
items, which have been debited in details to the individual personal accounts in the purchases ledger.
Like wise, it is credited with the sum of all items, which have been credited to such accounts. The
balance of the of the Purchases ledger control account should therefore tally with the sum of all
balances appearing in the individual personal accounts in the purchases ledger.

The format of this account appears below:

Dr purchases ledger control account Cr

Discounts received

Opening debit balance (if any) Opening credit balance

Total cash or cheques paid to Credit purchases

creditors
Total returns outwards Bill payable dishonoured

Total bills payable accepted Refund to creditors

Inter ledger transfer ( contra Charges by creditors

entries)
Closing balance of creditors Closing balance (if any)

As it was the case with the sales ledger control account, it is also important to point out the various
sources of the information entered in the purchases ledger control account. The table below provides
this information.

Sources of information for purchases ledger control account

Item Source
 Opening balance Schedule of creditors' balances
drawn up at the end of the
previous accounting period
Credit purchases Total from purchases journal
Purchases returns Total from returns outwards
journal
Cheques issued Bank column on credit side of
the cash book
Cash paid Cash column on credit side of
cash book
Discount received Total of discount column on the
credit side of the cash book
Transfers ( contras) General journal
Any charges by creditors General journal
Discount received withdrawn Genera journal
Closing balance Schedule of creditor’s balances
drawn up at the end of the
accounting period.

Example 2

From the information given below open up creditor’s personal accounts and record the information.
Then draw up the purchases ledger control account.

Date Particulars Ajulo Musoke Nabukko

20-8 Shs Shs Shs
June 1 Balance b/d 400,000 250,000 500,000
30 Credit purchases 600,000 400,000 700,000
30 Returns outwards 30,000 40,000 55,000
30 Payments 500,000 450,000 650,000
(cheques)
30 Discount received 10,000 20,000 40,000

Dr. Ajulo account cr

Date Details Fo Amount Date Details Fo Amount
20-8 Shs 20-8 Shs
June 30 Returns 30,000 June 1 Balance 400,000
outwards b/d
30 Bank 500,000 30 Purchases 600,000
30 Discount 10,000
received
30 Balance 460,000
c/d
1,000,000 1,000,000
 July 1 Balance 460,000
b/d

Dr. Musoke account Cr

Date Details Fo Amount Date Details Fo Amount
20-8 Shs 20-8 Shs
June 30 Returns 40,000 June 1 Balance 250,000
outwards b/d
30 Bank 450,000 30 Purchases 400,000
30 Discount 20,000
received
30 Balance 140,000
c/d
650,000 650,000
July 1 Balance 140,000
b/d

Dr. Nabukko account Cr

Date Details Fo Amount Date Details Fo Amount
20-8 Shs 20-8 Shs
June 30 Returns 55,,000 June 1 Balance 500,000
outwards b/d
30 Bank 650,000 30 Purchases 700,000
30 Discount 40,,000
received
30 Balance 455,000
c/d
1,200,000 1,200,000
July 1 Balance 455,000
b/d

Dr. Purchases ledger control account Cr

Date Details Fo Amount Date Details Fo Amount
20-8 Shs 20-8 Shs
June 30 Returns 125,000 June 1 Balance 1,150,000
outwards b/d
30 Bank 1,600,000 30 Purchases 1,700,000
30 Discount 70,000
received
30 Balance 1,055,000
c/d
2,850,000 2,850,000
The balance of shs 1,055000 indicated by the purchases ledger control account is equal to the sum of all
the balances indicated by the creditors’ personal accounts of :Ajulo dystocia shs 460000, Musoke shs.
140000, Nabukko shs. 555000.

INTER LEDGER TRANSFERS

A business may be dealing with another business both as a debtor and a creditor. This means that it
may in some cases buy goods from and sell goods to the same business. To avoid unnecessary
transactions, for instance, the Debtor paying the business and the business paying the creditor, the two
balances are offset against each other. This is done by closing the account with a smaller balance into
the one with a bigger balance. This transfer is known as a contra entry.

Deducting one account from the other, and paying or being paid the balance therefore effects the
settlement. A contra entry in this case is defined as a book-keeping entry by which a liability to a
supplier is reduced by a sum due by the supplier who is also a customer.

Example 3

On January 4, 20-9 Chemutai Retailers bought goods on credit for shs 508,000 from Opio stores and on
January 15, 20-9 sold goods on credit to Chemutai Retailers for shs 728,00. Show the personal accounts
in the books if Chemutai Retailers and make contra entries on January 31, 20-9.

Purchases Ledger

Dr. Opio Stores account Cr

Date Details Fo Amount Date Details Fo Amount
20-9 Shs 20-9 Shs
June 31 Contra 508,000 Jan 4 Purchases 508,000
sales

Sales Ledger

Dr. Opio Stores account Cr

Date Details Fo Amount Date Details Fo Amount
20-9 Shs 20-9 Shs
Jan 15 sales 728,000 Jan 31 Contra 508,000
Purchases 220,000
Balance
c/d
728,000 728,000
Feb 1 Balance 220,000
b/d

Example 4

E. Lubuye keeps his books so that a purchases ledger control account and sales ledger control account
are drawn up and balanced off each month. From the information given below, show these two
accounts for the month of April 20-7.
 Shs

Sep 1 Sales Ledger balance b/f. 5,240,000

1 purchases ledger balance b/f. 4,250,000

30 Receipts from debtors. 5,690,000

30 Payments from creditors 4,920,000

30 Credit sales. 6,340,000

30 Credit purchases. 3,550,000

30 discount allowed. 300,000

30 discount received. 250,000

30 Returns inwards 150,000

30 Returns outwards. 90,000

30 Bad debts. 120,000

30 interest charged to

Debtors for over due accounts. 5,000

30 dishonoured cheques. 380,000

30 sales ledger debit

transferred to purchases ledger. 25,000

Dr. Sales ledger control account Cr

Date Details Fo Amount Date Details Fo Amount
20-7 Shs 20-7 Shs
Sep 1 Balance b/d 5,240,000 Sep 30 Returns 150,000
inwards
30 Sales 6,340,000 30 Bank 5,690,000
30 Interest 5,000 30 Discount 300,000
allowed

Bad debts 120,000

30 Dishonoured 380,000 30 Transfer 25,000
cheques to
purchases
ledger
30 Balance 5,680,000
c/d
11,965,000 11,965,000
 Dr. Purchases ledger account Cr
Date Details Fo Amount Date Details Fo Amount
20-7 Shs 20-7 Shs
Sep 30 Returns 90,000 Sep 1 Balance 4,250,000
outwards b/d
30 Bank 4,920,000 30 Purchases 3,550,000
30 Discount
received 250,000
30 Transfer 25,000
from sales
ledger
30 Balance c/d 2,515,000
7,800,000 7,800,000

UN USUAL BALANCES IN CONTROL ACCOUNTS. Generally Debtors' personal accounts in the sales ledger
have debit balances and creditors’ personal accounts in the purchases ledger have credit balances. But
in some circumstances some debtors’ personal accounts may have credit balances and creditors’
personal accounts have debit balances.

This happens when:

(i) A firm has received from its debtors more than what was due from them or when excess
payment has been made to creditors.
(ii) . Empty containers, which were charged for in the invoice, are returned after debtors
settling their accounts or payments being effected to creditors.

However, in absence of refunds the sum of all credit balances in the debtors’ personal
accounts should be carried down on the debit side and brought down on the credit side of the
Sales Ledger Control Account.
The sum of all debit balances in the creditors’ personal accounts should be carried down on
the credit side and brought down on the debit side of the Purchases Ledger Control Account.
Example 5.
On September 5, 20-4 a cheque was received for shs 700,000 and on September 25, 20-4 the
empty crates valued at shs 100,000 which were charged for in invoice were returned. Post the
above transactions in Kirenga Retailers Account, balance it at the end of the month and bring
down the balance.

Dr. Kirenga Retailers account Cr

Date Details Fo Amount Date Details Fo Amount
20-4 Shs 20-9 Shs
Sep 5 Sales 700,000 Sep 20 Bank 700,000
30 Balance c/d 100,000 25 Returns 100,000
 800,000
Oct 1 Balance b/d 220,300 800,000

Example 6.
On October 2, 20-4 Asaba Stores bought goods on credit valued at shs 350,000 from Athieno
Wholesalers and on October 26, 20-4 a cheque for shs350,000 was issued to Athieno
Wholesalers and on October 26, 20-4 containers valued at shs 50,000 originally charged for in
the invoice were returned. Post the above transactions in Athieno Wholesalers Account,
balance it at the end of the month and bring down the balance.

Dr. Athieno wholesalers account Cr

Date Details Fo Amount Date Details Fo Amount
20-4 Shs 20-4 Shs
Oct 20 Bank 350,000 Oct 2 Purchases 350,000
26 Returns 50,000 31 Balance 50,000
c/d
400,000

50,000

Example 7. The information below was obtained from the books of J. Ddamulira & Sons for the
month of October 20-2.

Oct 1 Debit balance in the sales ledger 1,300,000.

1 Credit balance in the sales ledger 270,000.

1 Debit balance in the purchases ledger. 350,000.

1 Credit balance in the purchases ledger 1,500,000.

31 Credit sales 3,200,000.

31 Credit purchases 1,600,000.

31 Cheques received from debtors 1,800,000.

31 Discount received 190,000.

31 Discount allowed 130,000.

31 Returns inwards 100,000.

31 Returns outwards. 160,000.

31 Bad debts written off 120,000.

31 Sales ledger debit transferred to

purchases ledger. 350,000

31 Cheques issued to creditors 1,200,000.

31 Credit balance in the sales ledger 220,000.

31 Debit balance in the purchases ledger 200,000.

Required:
(a). Sales ledger control accounts.
(b). Purchases ledger control accounts.

Dr. Sales Ledger Control Account Cr

Date Details Fo Amount Date Details Fo Amount
20-2 Shs 20-2 Shs
Oct 1 Balance b/d 1,300,000 Oct 1 Balance 270,000
b/d
31 Sales 31 Bank 1,800,000
3,200,000
31 Balance c/d 220,000 31 Returns 100,000
inwards

Discount 130,000
allowed
31 Bad debts 120,000
31 Transfer 350,000
to
purchases
ledger
Balance 1,950,000
c/d
4,720,000 4,720,000

Dr. Purchases ledger control account Cr

Date Details Fo Amount Date Details Fo Amount
20-2 Shs 20-2 Shs
Oct 1 Balance b/d 350,000 Oct 1 Balance 1,500,000
b/d
31 Bank 31 Purchases 1,600,000
1,200,000
31 Returns 160,000 31 Balance 200,000
outwards c/d
31 Discount 190,000
received
31 Transfer 350,000
from sales
ledger
31 Balance c/d 1,050,000
3,300,000 3,300,000

From the above example, it should be noted that each of the above accounts have two opening
and closing balance. For the Sales Ledger Control Account the closing credit balance of shs
220,000 is given and is carried down on the debit side. The debit balance of shs 1,950,000 is
obtained by subtracting the total of the credit side from that of the debit side and is carried
down on the credit side. In the same way for the Purchases Ledger Control Account the closing
debit balance of shs 200,000 is given and carried down on the credit side. The credit balance of
shs 1,050,000 is obtained by subtracting the total of the debit side from that of the credit side
and is carried down on the debit side.
Example 8.
The Sales Ledger Control Account below was prepared by G. W Ogutu on October 30, 20-6.

Dr. Sales ledger Control Account. Cr

Shs Shs
Balance b/d 610,000 Receipts from 1,483,000
debtors
Credit sales 1,792,000 Provision for bad 63,000
debts
Cash sales 993,000 Dishonoured 326,000
cheques
Discount allowed 216,000 Carriage charged to 46,000
debtors
Transfer to 197,000
purchases ledger
Balance c/d 1,496,000
3,611,000 3,611,000

A list of debtors’ balances extracted from the Sales Ledger on the same date totaled to shs
869000. On further examination of the books the following errors were revealed.
(a) The discount allowed figure includes shs66,000 allowed for cash sales.
(b). Bad debts shs110,000 were written off.
(c). The total of the Returns inwards Journal shs192,000 was not recorded in the Sales Ledger
Control acccount.
(d). A refund to a debtor shs30,000 was not recorded in the control account. You are required
to draw revised Sales Ledger Control Account. The revised Sales Ledger Control Account will
appear as follows:.
Dr. Sales ledger control account. Cr
Shs Shs
Balance b/d 610,000 Receipts from 1,483,000
debtors
Credit sales 1,792,000 Discount allowed 150,000
Dishonoured 326,000 Bad debts 110,000
cheques
Carriage charged to 46,000 Returns inwards 192,000
debtors
Refund to debtors 30,000 Balance c/d 869,000
2,804,000 2,804,000

Note that items such as cash sales, discounts on cash sales, and provision for bad debts are left
out when re-drafting the Sales Ledger Control Account because they are never entered in the
individual accounts in the Sales Ledger.