CONTROL ACCOUNTS AND ITS USES
As the business grows in size, more than one ledger is required for recording its transactions which have also expanded with the business. Since the bulk of the entries are made in the accounts of debtors and creditors, these two classes of accounts are taken out of the General Ledger and put in separate ledgers - the Sales Ledger for debtors' accounts and the Purchases Ledger for creditors' accounts. There may be more than three ledgers but for simplicity, we shall limit the ledgers to three for the moment. The use of more than one ledger makes it possible to subdivide work and to obtain rapid accounting information when required. When all accounts are kept in one ledger, a Trial Balance can be extracted to prove the arithmetical accuracy of the accounts therein. Any error revealed in the Trial Balance can be easily and quickly located since the number of entries in the ledger is comparatively less in a small business. When several ledgers are used, it would be very tedious to look for any error revealed in an overall Trial Balance because we have to check all the ledgers before we can locate the error. If something like a sectional Trial Balance can be constructed for each ledger, then we only have to search for the error in the ledger whose Trial Balance totals do not agree. It is obvious that the totals of a Trial Balance, extracted from any one of the three ledgers in use, will not agree since some of the accounts are missing. The debtors and creditors are missing from the General Ledger . To make the General Ledger complete by itself, two Control Accounts, one to take the place of all the debtors and one to replace all the creditors are constructed and incorporated within the General Ledger. The General Ledger is, therefore, made self-balancing by the use of Control Accounts, sometimes called Total Accounts. WHAT IS A 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. TYPES OF CONTROL ACCOUNTS
There are two types of control accounts namely, Creditors and Debtors Control Accounts Debtors Control Account:
A Debtors Control Account to represent all the debtors in the Sales Ledger is sometimes known as the Sales Ledger Control Account or the Total Debtors Account. If an analysis of all the debtors, in the Sales Ledger is carried out and totals are computed for each item such as the total of opening balances, total sales, total cash and cheques received, etc., then an account made up of these totals can be constructed to represent all the entries made in the Sales Ledger. Such an account is called the Debtors...
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