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May 22, 2006

What is the Purpose of Control Accounts?

A control account is a summary account in the general ledger. The details that support the balance in the summary account are contained in a subsidiary ledger—a ledger outside of the general ledger.

The purpose of the control account is to keep the general ledger free of details, yet have the correct balance for the financial statements. For example, the Accounts Receivable account in the general ledger could be a control account. If it were a control account, the company would merely update the account with a few amounts, such as total collections for the day, total sales on account for the day, total returns and allowances for the day, etc.

The details on each customer and each transaction would not be recorded in the Accounts Receivable control account in the general ledger. Rather, these details of the accounts receivable activity will be in the Accounts Receivable Subsidiary Ledger. This works well because the employees working with the general ledger probably do not need to see the details for every sale or every collection transaction. However, the sales manager and the credit manager will need to know detailed information on individual customers, including whether a customer recently reduced their account balance. The company can provide these individuals with access to the Accounts Receivable Subsidiary Ledger and can keep the general ledger free of a tremendous amount of detail.




Comments

79 Responses to “What is the Purpose of Control Accounts?”

  1. hood zaid on February 22nd, 2007 4:04 am

    i just want to understand what are control accounts.

  2. Fatumah Matov on February 28th, 2007 8:48 am

    When do i use the cash register, book register, Petty cash register, Journal, Accounting receivable register in quick books program

  3. MAXENSIUSY MHULE on June 10th, 2007 11:55 pm

    I want to know detail how control accounts can be calculated and NOTES OF CONTROL ACCOUNTS

  4. random on July 12th, 2007 12:49 pm

    it says in the text.

    control accounts are a summary of subsidiary accounts

    e.g. sales ledger control account….

    sales £10,000

    in subsidiary accounts

    sold to bob £1,000
    sold to jane £5,000
    sold to fred £4,000

  5. rachel on January 9th, 2008 8:58 am

    to explain it simply, do you mean that the purpose of the control accounts are to : have an instant information, the errors are highlighted,to prevent fraud and to ensure accuracy? :)

  6. Jeremy on January 11th, 2008 8:20 am

    Kindly explain to me why we sometimes have two opening balances in control accounts.

    Regards.

  7. JAFFET on March 21st, 2008 3:07 pm

    what are the disadvantages of control accounts

  8. judith on April 14th, 2008 4:06 am

    please send me answers for the above questions. thank you and God bless

  9. SANNI OLABISI on April 21st, 2008 6:19 am

    I WANT TO KNOW WHAT CONTROL ACCOUNT IS

  10. shantilli on April 28th, 2008 10:14 am

    give two advantages of maintaining control accounts

  11. Kitty on April 29th, 2008 10:26 pm

    Rachel = no. It could be instant information, but unless you haven’t made any transactions it won’t be up to date. Control accounts are like summary accounts. They are accounts with sub-accounts. Control accounts are updated based on when the company needs to update. Sometimes it’s daily, sometimes it’s weekly, and sometimes it’s monthly.
    Unless the debits and credits do not math in the control account, errors would not be obvious…nor would fraud. Control accounts do not contain specific information and therefore are easily altered. The sub-accounts contain specific information and fraud would more easily be detected.
    If you are using a manual accounting system, triple check everything you do. It’s tiring, but it’s easy to make mistakes. If you are using a computer account system, you have it easy. Most computer accounting systems update automatically and make errors evident when documents are linked.
    Accuracy is improved not just by control accounts, but also by controls like segregation of duties, field checks, pre-numbered forms and checks, etc.

  12. Kitty on April 29th, 2008 10:37 pm

    Jeremy: The only reasons I can think of for one account having two opening balances are: 1) someone screwed up, and 2) you are viewing the unadjusted and adjusted balances. Opening balances for one period are usually ending balances from the previous period. Exceptions include accounts that are closed to other accounts (i.e. accounts receivable being closed to income summary). Ending balances are often adjusted to reflect certain changes that are only made at the end of an accounting period (like adjusting for depreciation in a manual accounting system).

  13. Kitty on April 29th, 2008 10:42 pm

    JAFFET: Without regard to issues usually handled by general controls, disadvantages of control accounts include the time involved to update them (especially with manual accounting systems) and the fact that they do not contain specific information. Without general controls, a main concern is not transferring data from the sub-accounts properly.

  14. Kitty on April 29th, 2008 10:45 pm

    SANNI: A control account is an account that holds summarized information obtained from sub-accounts. The accounts receivable ledger is a control account with the accounts receivable subsidiary ledger being the sub-account. The A/R ledger contains summarized information from the A/R Sub, which contains specific details like the names of clients, when they paid, how much they paid, which invoice they are paying, etc.

  15. wu on May 2nd, 2008 8:19 am

    In the control account,do we need to ,say,record the discout expense to debors??

  16. Tasay on May 15th, 2008 2:34 pm

    WELL THE SITE IS VERY COOL BUT I WOULD LIKE TO KNOW THE TYPES OF CONTROL ACCOUNTS AND THEIR MEANING.

  17. abubakar on May 31st, 2008 4:36 am

    why is the “sales ledger control account” is also termed as “debtors account” & “purchase ledger control account as “creditors account”

  18. Bel on June 1st, 2008 9:08 pm

    Abubakar: The sales Ledger account is also termed as the Debtor’s account because it involves information and activities relating to people you owe money(e.g. people who have to pay you for your services or products that you sell) These are referred to as your debtors thus the name ‘debtors account’

    The purchase ledger control account is referred to as the creditors account because it includes all information and activities relating to people who owe you money(people you have to pay e.g vendors/suppliers that you may use) These are called Creditors thus the name ‘creditors account’

  19. R on June 11th, 2008 6:19 am

    Bel - Creditors are people you owe money to and Debtors are people who owe money to you….. I didnt feel you made that clear in your answer.

  20. Naz on July 2nd, 2008 6:42 am

    The role of control accounts in the preparation of final accounts.

  21. Rozana on July 7th, 2008 5:16 am

    I have learned alot from Accounting coach, thanks alot. I want to know, can u please send me the most recent accounting packages and taxes used by Ireland.

    thank you.

  22. kelly998877 on July 8th, 2008 7:15 am

    thanks for new way of technology.

  23. sue bee on July 13th, 2008 11:47 pm

    please explain on revised schedule of debtors

  24. Javed Jattak on July 31st, 2008 11:06 pm

    Kindly explain me the control accounts?

  25. dan on August 11th, 2008 9:40 am

    what is the difference between “sales ledger control account” and “receivables control account”? the same?

  26. dandan on August 11th, 2008 9:41 am

    what is the difference between “sales ledger control account” and “receivables control account”?

  27. ain on August 16th, 2008 12:57 am

    briefly explain cost of control account and illustrate the cost of control account including the respective items

  28. Ganesh on August 20th, 2008 3:26 am

    Thank’s alot for giving information. just now only i came to know about the control account, before i not at all heared about this topic, through this i came to know, onces again thank you, i came to know in detail about new topic in finance

    thanks you,

  29. Mimi on August 25th, 2008 6:41 am

    what are the principles of control accounts?

  30. baby yo on September 3rd, 2008 8:23 am

    i like the way you answer questions, pls can you throw more light on this

  31. mani on September 3rd, 2008 12:19 pm

    can u plz state that where petty cash should be shwn ?in sales ledger contrl accounts or purchase ledger control accounts..!

  32. kelly1386 on September 3rd, 2008 12:23 pm

    can kitty or anyone answer my this question?
    u know when u are required to corrected either control account or some other individual legder, the formular is:
    >>original balance per control account $
    >> less: cash receipt under-recorded in $
    cash book
    my question is y is less the cash receipt not add it. an example is :
    an amount of $160 received is correctly recorded in the debtors leger but was recorded as $116 in the cash book.
    i m so confused, cos since the cash is underrecoreded abt $44, u must added to the cash book in order to correct the error, but y the formular is “less”
    thks for all attention

  33. tina on September 8th, 2008 9:32 am

    using relevant examples examine the relevancy and importance of the financial account adjustments

  34. dale on October 1st, 2008 7:22 pm

    in control a/cs how can i identify when adjustments affects for eg. both payables ledger balance and and payables control account?

  35. DmONKEYS on October 11th, 2008 4:18 am

    do credit note or debit notes must be writen in crontrol accounts?

  36. jumol on October 11th, 2008 11:09 am

    how do u take care of cash purchases &cash sales in control a/c .i.e is it included in the in the preparation of the a/c.

    2.supposing a control a/c question has both cr and cash sale, cr and cash purchases, what sales balance/purchases balance will appear in the preparation of trading a/c.

  37. Bela on October 20th, 2008 3:20 am

    can any one please tell me what is the main limitation of using a control account to verify these ledgers accounts?

  38. The Don on October 30th, 2008 9:38 pm

    There is a simple way to explain control accounts.

    A better name for a control account would be a “container account.” For instance, let’s use a manufacturing company as an example.

    Let’s say that a manufacturing company produces a product in April. That product will have a Job Cost Sheet, which simply shows costs such as Direct Labor, Direct Materials, and Manufacturing Overhead that are involved in creating the product. This job cost sheet is a “subsidiary ledger.” Now let’s assume that the job isn’t finished, and there’s a $30,000 balance from Direct Labor.

    In order for managers to be able to keep track of costs they use inventory accounts to store these costs until the products are sold. Work in Progress is an inventory account. Work in Progress will show a $30,000 balance, the same as the Job Cost Sheet, because Work in Progress is a control account. Work in Progress “contains” or summarizes the information of the “subsidiary ledgers” that are below it, thus the $30,000 from the Job Cost Sheet will be shown in both accounts.

    Let’s say that there are four other Job Cost Sheets with balances of $10,000 each. That’s another $40,000 that will be added to the Work in Progress control account, giving it a total balance of $70,000. Now let’s say that the original Job Cost Sheet is completed. That $30,000 will be transferred out of Work in Progress and into Finished Goods Inventory, however, the other $40,000 will still remain in the Work in Progress control account, because the additional Job Cost Sheets, or “subsidiary ledgers” are still open.

    A control account, such as Work in Progress, simply summarizes all of the information of separate subsidiary ledgers that are below it. So whenever a new Job Cost Sheet is created with a balance, that balance will be shown in the Work in Progress as well, along with other balances from other Job Cost Sheets.

  39. Johnny on November 6th, 2008 8:33 am

    please give me examples of control accounts except account receivale control account and account payable control account? give me 2 more examples please

  40. shenaz on November 17th, 2008 10:25 am

    Can some one tell me the advantages of control account

  41. Johannah Balibali on November 25th, 2008 3:05 am

    Tanks for the way you give your answers coz they are realy motivating and encouraging. May I seek to know how control accounts prevent fraud in an organisation?

  42. nyairo on November 25th, 2008 4:46 am

    i could like to be one of your member and scholar from kenya

  43. Lyl Cryz on November 25th, 2008 10:01 am

    Thank you very much the wounderful work that you are doing. we really appriciate it coz its helping us lot. God bless you, and keep it up. please i would like to know the measures put in place to prevent fraud and misappropriation a sole proprieter (spare parts dealer)

  44. maina on November 27th, 2008 3:14 am

    could you please the answers for the the above question read from your site.WHAT ARE THE BASIC ELEMENTS OF ACCOUNTING STATEMENTS?

  45. kisala on December 11th, 2008 4:50 am

    Send meabout ten advantages of sales ledger control account and purchase ledger control accounts

  46. Bobo on December 20th, 2008 7:10 pm

    please can you let me know what are diffrent between purchase ledger account and sales ledger account and thier advantages please

    thanks

  47. Erra on January 15th, 2009 4:26 am

    what is the main reason for control account

  48. wesley on January 19th, 2009 3:08 am

    thanks for the wonderful work you are doing to keep us informed in accounts especially through the internet. Keep up and God bless you.

  49. wesley on January 19th, 2009 3:10 am

    thanks for the wonderful work you are doing to keep us informed in accounts especially through the internet. Keep up and God bless you. Please I would like you to send me the procedures for preparing a control account and a suspense account

  50. merit_d on January 22nd, 2009 4:37 am

    I want to know detail how control accounts can be calculated and NOTES OF CONTROL ACCOUNTS

  51. Jai on January 26th, 2009 2:04 pm

    main purpose of control accounts?

  52. linus on January 29th, 2009 7:56 am

    i love account so much

  53. catharine on February 17th, 2009 12:28 pm

    There is an error in the second sentence of the first paragraph. Thanks for the explanation though.

  54. Appollos on February 19th, 2009 11:08 am

    thanks for good job, god bless you people. Can you please send me the the advantage s and this advantages of control accounts as well their formulas, both debtors control account and creditors contro account. thanks !!!!

  55. dimeji on February 25th, 2009 4:56 am

    i just want 2 know how to recognize items on the debit & credit sides of the control accounts (creditors and debtors)

  56. Taofik on March 6th, 2009 5:09 am

    this is a wonderful job whuch will help so many “would be” accountant

  57. Juan Alice on March 25th, 2009 10:21 pm

    I am indeed very glad and grateful for the wonderful job done you people. This is a very clear explaination rooted in Control a/c topic. God may increase your effort. Thanks once more!

  58. rk on April 13th, 2009 10:32 pm

    i think 4 beginers v should explain in more simple way

  59. ravin on April 16th, 2009 7:01 am

    please explain the meaning ,purpose,advantages and formates of contro accounts

    thanks

  60. nasir on April 16th, 2009 7:41 am

    tell ma the advantages of control account

  61. orange on May 3rd, 2009 10:03 am

    somebody can give 5 advantages of maintaining control accounts?????
    pls~~

  62. Beth on May 4th, 2009 3:40 am

    Was happy when i found this discussion.Please tell me the role of control account in the financial preparation.

  63. gaurav on June 10th, 2009 8:19 am

    well your efforts is so important for teacher as well as student. my question is - what is difference between differencial cost and incremental cost.

  64. ESHY on July 7th, 2009 2:53 am

    can you kindly send me a full tutorial on these accounts and formats what to be rcoded where.

  65. zizi on July 14th, 2009 5:53 am

    i want to know example of receivable ledger control account

  66. Julius linaani on July 25th, 2009 3:30 am

    please provide me with defination of control accounts, their uses, preparation strategies

  67. avalanch on July 29th, 2009 11:59 am

    I just started ths topic and so far it’s intresting. However, i need some samples of controll accounts, in order to complete my assignment.

  68. Stocky on August 27th, 2009 9:40 pm

    my own xperience we can say,Control a/c can now be defined as memorandum a/c,d balance of which reflects d aggregate balances of many related subsidiary a/c which are part of d double entry system.and what are d advantages of control account and, Division of control account pls list it for me.

  69. dzupiris on September 15th, 2009 9:01 pm

    To find out more on controlling accounts and subsidiary ledgers and what is their relationship, this link might help:
    http://www.webanswers.com/business/what-are-controlling-accounts-and-subsidary-ledgers-what-is-their-realationship-11c0fc

  70. david on September 17th, 2009 12:54 am

    Give us please sample of question in the site.You are of help to me.

  71. herbert on September 22nd, 2009 3:46 am

    i want you to help me on how to prepare a balance sheet in partnership accounts

  72. IKIDI STANLEY on September 24th, 2009 6:59 am

    i want to understand the fundamentals of control accounts and how to calculate it? what are the keys to its understanding?

  73. maryann on October 3rd, 2009 11:43 am

    i want to understand the foundamentals of control account and how to calculate it? what are the keys to its understanding

  74. laura ibre on October 14th, 2009 2:09 am

    i want to know about control account. how to prepare and what are the material i will use and on how to calculate this.

  75. rem on October 26th, 2009 4:43 am

    i want to know how to calculate control account
    and how to defrentiate the debt and credit side

  76. Mohammad Zarif on October 28th, 2009 10:22 pm

    First of all thank from dear lecturers whom prepared these materials and made available for everyone. Second, I have a suggestion that send me more basic materials because I am a new accounting student. Now I have lots problems with accounting.

  77. Doooo on November 4th, 2009 8:56 am

    One of my duties in a new company is to draw up a reconciled debtors listing and agree with control account. How do I do it?

  78. Robert Aduah on November 6th, 2009 4:57 am

    I want to kown how to treat return inwards

  79. rafaqqat on November 7th, 2009 3:06 am

    it is the sales return. accountry entry is debit sales return account and credit to customer account

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