Control Account

This is an account which checks the arithmetic accuracy of a specific ledger. A control account
summarizes a set of subsidiary accounts. Large businesses use it to minimize the summary postings in the
general ledger. Instead, enterprises record all the transaction details in a separate subsidiary ledger.
Such actions mean that there is no need to reconcile and extract individual accounts to get account
information because the company can refer to the control account balance.

Reasons/ Advantages for/of Control Accounts

 Internal Control- Provides a checking mechanism to detect errors and fraud at an early stage
and quickly by comparing the control account balances with that of the totals of the subsidiary
ledgers.
 Removes bulky details from the general ledger.
 Larger companies can set up accounting departments for specific areas. This facilitates the
subdivision of accounting work, leading to specialisation. Accounting staff can specialise in
either debtors or creditors ledger (receivables or payables). This minimizes the likelihood of fraud
because different staff independently maintains control account records and subsidiary ledger.
 Control accounts allows for information to be obtained quickly for debtors and creditors balances
as totals are readily available and obtained for the preparation of the trial balance. This is so as
figures provided are a summary of totals, rather than individual accounts. This results in speedy
preparation of the final accounts.

Types of Control Accounts

 Sales Ledger Control Account
 Purchase Ledger Control Account
Sales Ledger Control Account
The Sales Ledger Control Account is a summary account which checks the arithmetical accuracy of the
Sales Ledger. It enables us to see at a glance whether the general ledger balance for the sales ledger
agrees with the total of all the individual trade receivable/ debtor’s accounts held within the sales ledger.
Sales Ledger Control Account typically looks like a "T-Account" or a replica of an Individual Trade
Receivable ( Debtor) account, but instead of containing transactions related to one trade receivable
(Debtor) it contains transactions related to all the trade receivables (all the debtors) in the business. As
this control account contains the summarized information of all the trade receivables accounts in the sales
ledger, it is also called as "Total Trade Receivables Account"("Total Debtors Account").
The sales ledger control account summarises the individual credit sales, return inwards (sales returns),
receipts from debtors (credit customers), bad debts written off, discounts allowed and other transactions
that are recorded in the accounts of a large number of debtors.

Dr. Sales Ledger Control Account Cr.

Jan 1 Balance b/d (Dr Bal.) xxxx Jan 1 Balance b/d (Cr Bal.) xxxx
Dec 31 Sales Journal xxxx Dec 31 Cash/Bank xxxx
Dec 31 Dishonoured Cheques xxxx Dec 31 Discount Allowed xxxx
Dec 31 Refunds to Debtors xxxx Dec 31 Return Inward Journal xxxx
Dec 31 Debtor’s Interest xxxx Dec 31 Bad Debts xxxx
Dec 31 Balance c/d (Credit Balance) xxxx Dec 31 Set off Purchases Ledger xxxx
Dec 31 Balance c/d (Debit Balance) xxxx
xxxx xxxx
Jan 1 Balance b/d xxxx Jan 1 Balance b/d xxxx

*****NB: The Sales Ledger Control A/C usually carries a DEBIT BALANCE. However, there are
instances where it may carry a CREDIT BALANCE. A credit balance in the Sales Ledger Control A/c
represents amounts being owed to the debtors as a result of

 Overpayments by debtors
 Return Inwards after the account have been settled.
 Sources of Information for the Sales Ledger/ Debtors Control Account

Item Source of information

1. Opening trade receivables (opening debtors) Total of Trade Receivable' balances at the end of the previous
accounting period.

2. Credit Sales Total Credit Sales from the Sales Day Book (Sales Journal).

3. Return Inwards (Sales returns) Total sales returns from the Return Inwards Journal

4. Cash received From the cash column on the debit side of the Cash Book. 

5. Cheques received From the bank column on the debit side of the Cash Book.

6. Discount allowed Total of the Discount column on the debit side of the Cash book.

7. Bad debts written off From the Journal (General Journal).

8. Dishonored cheques From the bank column on the debit side of the Cash book.

9.  Refunds to trade receivables  From cash/bank column on the credit side of the Cash book.

10. Set off (Transfer to Purchases ledger) From the Journal (General Journal).

11. Interest charged on overdue accounts. From the Journal (General Journal).

12. Closing Trade receivables (closing debtors) Total of Trade Receivable' balances at the end of the current
accounting period.