• Trade receivables are reported as a current asset and trade payables are reported as current liability in the balance sheet at the end of an accounting period. • It is important, therefore, that a business taken steps to ensure the accuracy of these figures. • One such step is the preparation of Control account to confirm that the total of the sales ledger balances and the total of the purchases ledger balances are accurate
What is Control Account?
• A control account is one which records the total of what may be a large number of individual ledger account balances. • For example, there may be numerous accounts, perhaps thousands, for individual debtors in the Trade Receivable Ledger, each reporting the amount receivable from particular debtors whereas a Trade Receivable Control account will have a single balance equaling the sum of all the individual debtors’ balances.
Control accounts may have different names
• Control account maintained in respect of the credit customers might be known as Trade Receivable Control Account, Debtor Control Account and Sales Ledger Control Account • The corresponding one maintained for suppliers might be known as Trade payable Control account, Creditor Control Account and Purchase Ledger Control Account
The steps for writing up a Control Account
Let us assume that Irdyna wishes to write up a Trade Receivable Control Account starting on 1 May 2010.Irdyna will proceed as follows:
Step 1: Obtain from the Trade Receivable Ledger clerk a list of amount receivable from every one of his credit customer as at 1 May 2010.
|Trade Receivable as at 1 May 2010 | | |RM | |Vivianz |1,000 | |Michael |1,250 | |Siti |5,200 | | |7,450 |
Step 2 : Obtain from the Sales Day Book clerk the total credit sales made in the month of May 2010
|Sales day book May 2010 | | |RM | |Vivianz |6,000 | |Michael |4,150 | |Siti |9,050 | | |19,200 |
Step 3: Obtain from the cashier particulars of all amount received in May 2010from the credit customers. This information will be readily available if the Cash Book has analysis columns
|Extract from the Cash book May 2010 | | |RM | |Vivianz |900 |...