A control account is a summary account that gathers the totals of debtor or creditor transactions. It acts as a check on the accuracy of the sales ledger and the purchases ledger.
The two main control accounts
- Debtors (Receivables) Control Account — summarises the amounts owed by customers.
- Creditors (Payables) Control Account — summarises the amounts owed to suppliers.
Key idea
Debtors control: opening balance & credit sales on the debit; receipts, returns inwards, discount allowed & bad debts on the credit. Creditors control: opening balance & credit purchases on the credit; payments, returns outwards & discount received on the debit.
Example (Debtors Control Account)
| Details | RM |
|---|---|
| Opening balance (debit) | 5,000 |
| Credit sales (debit) | 20,000 |
| Receipts (credit) | (18,000) |
| Returns inwards (credit) | (1,000) |
| Bad debts (credit) | (500) |
| Closing balance (debit) | 5,500 |
Example
Control account data comes from the totals of the books of first entry — the totals of the sales journal, cash book and so on, not the individual accounts.
Sources and advantages
The figures in a control account come from the totals of the sales journal, purchases journal, returns journals, cash book and general journal. Advantages include locating errors quickly, providing an instant debtors and creditors balance without adding up every account, and strengthening internal control because different people prepare the ledger and the control account.
Remember
A control account balance should equal the sum of all the individual balances in the related ledger.