Definition

The control account is a summarized account in the basic ledger. It includes aggregated complete for the transactions that space posted in the subsidiary ledger. It is likewise called a controlling account because it enables us to execute reconciliation manage on the ending balance.

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In various other words, manage account enables us come reconcile the aggregated balance that the subsidiary ledger with the complete balance to be used in attempt balance.We carry out reconciliation in between these balances (although, both balances space same, one balance is an aggregate of the party wise/subsidiary ledger and also another balance is control account balance i m sorry is derived by motion of the relevant accounts affecting on the finishing balance).

 So, if reconciliation/control proves that there is no difference between two balances, it method figures space reliable and also can be offered to prepare the gaue won statement.

Detailed knowledge of the control accounts

In the bookkeeping cycle, the first step is posting entries in the books of accounts. Once different accounting entries are posted in the books, various ledgers are created that help to collection structured and complied data pertained to different company operations.So, Ledger accounts aid accumulate all entries the the specific period for a certain account under one head, such as ‘account payable’ and ‘account union etc.’ later these balances can easily be tracked and also updated together needed.

For instance, every the transactions regarding credit purchases will certainly be posted in the subsidiary payable accounts, wherein party-wise data is maintained in addition to purchase returns and discounts received. At the period end, we have actually a ledger because that each of the parties.Each party’s total is accumulated at one place, and a particular balance is calculated come be supplied in the trial balance because that the formation of financial statements. This is the balance obtained from basic ledger.However, before using certain balance calculated, we need to use control and ensure the accuracy the the balance. We need to use control due to the fact that these accounts are expected to have actually a massive number of transactions. So, there are higher chances because that errors and also mistakes.Hence, we should exercise part controls. To perform so, us get accumulated balances that impact the movement of accounts. For instance, account payable is effected by credit purchases, payment made come the supplier, purchase returns, and also discounts received.
So, we achieve a aggregate of these balances and make an account v these balances; this account is referred to as a control account particularly prepared just for reconciliation v the total balance that the general ledger’s account.

Control account for accounts payables (reconciliation perspective)

Suppose the closeup of the door balance that the account payable in the control account (prepared with gathered balances) is the very same as the total accounts payable balance in the general ledger. In that case, our confidence in the closeup of the door balance boosts as these are reconciled.However, periodically there have the right to be no match between the closing balance in the manage account and the complete of the party-wise accounts. In this case, there room three possibilities of errors that encompass the following.There is/are an error/errors in the control account.There is/are error/errors in general ledger accounts.There are errors in both control and also general ledger accounts.It’s vital to note that the regulate account balance go not influence the figures in the attempt balance and also financial statement. That prepared just for the control purpose.

Control account because that accounts payable (reconciliation perspective)

Similarly, every the entries about credit sales room posted in the account unification ledger, along with sales returns and also discounts allowed. To ensure accuracy that the ending balance for accounts receivables, we obtain built up figures for the credit sales, cash received, sales return, and also discount permitted to build the control account.So, the control account equalizes all subsidiary accounts, and also it help simplify and organize general ledger account. Once we have reconciled the balance of accounts receivables in the basic ledger with collected movement of the accounts receivable (control account), we can reliably usage the ending balance come prepare jae won statements.Usually, suppliers generate two species of regulate accounts: sales ledger regulate accounts and also payable ledger control accounts. The reason for these regulate account ready is the there are an ext transactions in these account balances, and chances the error are higher as well.
Let’s comment on these types of account in some detail.

Types of regulate account

There are greatly two varieties of regulate accounts, as discussed below.

1- Sales ledger regulate account – (SLCA)

Sales ledger manage account is also known together debtor control account or profession debtor control account. That explicits complete trade debtors of a business entity at a particular given period. Further, that elaborates the total amount owed by all customers in a offered time frame.It offer the objective of the reconciliation that rises our trust in the ending balance of accounts receivables.

Example that sales ledger regulate account

Suppose that on December 31, 2020, the total debtors in the basic ledger of alphabet manufacturing company valued at $180,000 as break-up is shown.

Serial number of DebtorsDebtorAmount in $1Thomas traders20,0002Interior decorations50,0003United group of stores30,0004Thomson retailers80,000Total Debtors 180,000

Let’s look in ~ the regulate account movement and also assess if finishing balances in the control account are the exact same as offered in the ledger.Following are the gathered balances the the figures that influence the finishing balance of account receivables.Sales control Account B/S $200,000  credit sales $300,000  Sales return  $15,000 Discount allowed $25,000 Provisions $20,000 Cash collected $260,000 C/D  $180,000  $500,000$500,000
As we deserve to analyze, that carried forward balance the the regulate account is equal to the closing balance in the general ledger, totaling come $180,000.Hence, we have reconciled the control account and also receivable balance in the general ledger. Now, we room confident in the accuracy the the receivable balance and also can be supplied to form a jae won statement.

2- acquisition ledger control account – (PLCA)

Purchase ledger manage account is also known as trade creditors regulate account. It mirrors the complete purchases along with discounts received on purchases and also the purchase returns for a certain period.Simply we can say that it tells exactly how much business owes come the suppliers of a service at a details time period. It means the accumulation accounts payable are included in this control account.

Example of acquisition ledger control account

Suppose the closing balance of creditors in the general ledger is valued in ~ $3,45,000 as of December 31, 2021, and also the adhering to is the break-up of the balance.Serial number of CreditorsCreditorsAmount in $1Robin traders42,3002Robust corporation50,0003United group of Companies75,3454UX manufacturing67,0005Fans club22,0006Denial firm88,355Total Creditors $345,000
Purchase manage Account B/S  $400,000 credit purchase $500,000 purchase return $50,000  Discount received$15,000  Cash paid$490,000  C/D $345,000  $900,000 $900,000
We deserve to analyze the the complete balance in the payable ledger quantities to $345,000 and carried forward balance in the payable manage account amounts to the very same balance. Hence, we have actually reconciled the balances and can usage this balance in the ready of jae won statements.

A practical example for the manage account

A typical example of a control account is account receivables. It’s the account that is offered to document all credit transactions make in regards to sales. Further, all the connected transactions like cash accumulated from credit customers, discount allowed, provision recorded, and also sales return are videotaped in the control account.However, these balances room in aggregate, and it’s complicated to trace the certain balances in the regulate account. So, to map the balance of the certain party, we must analyze the subsidiary ledger/party-wise ledger.

Frequently request questions

What is the function of the manage Account?A regulate account is used to examine the number accuracy of the balances that space posted in basic ledger accounts. That can uncover out mistakes and errors in personal or separation, personal, instance accounts.The other accounts for which control account have the right to be provided are equipment, machinery, and also inventory of a business. Further, it’s advisable that a manage account be prepared for the account balance through a higher number of transactions.

What space the flaw of control accounts?Disadvantages the the regulate accounts encompass the following,Not all species of errors deserve to be detected through the control account.Sometimes, there deserve to be errors in both balances, including the ledger balance and also the balance in the regulate account. (so, it’s complicated to situate an error)It’s a summarized account, and also party-wise details can not be traced.

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What are the benefits of a regulate account?Following are some of the benefits linked with the control accounts,Reconciliation that the general ledger through the regulate account help to boost the accuracy that the account balance.Trial balance has aggregated balances, for this reason it’s not difficult to produce manage accounts, and their role in check balance accuracy is vital as well.It help in strategic analysis of the balances as there is no much detail.