Theory question 102
Control Accounts2. (a) What are control accounts? (b) Explain three purposes for preparing control accounts.
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(a) Control accounts (total accounts) are summary accounts in the general ledger that record in total the transactions posted individually to a subsidiary ledger, e.g. the sales ledger control and purchases ledger control accounts. Their balance should equal the total of the individual balances in that ledger.
(b) Any three purposes: they check the arithmetical accuracy of a ledger and help locate errors quickly; they give total debtors and creditors quickly for final accounts; they help prevent and detect fraud, especially when kept by a person other than the ledger clerk; they allow a trial balance to be drawn up without listing every personal account; they help in incomplete records to find credit sales and purchases.
Remember that the control account balance must agree with the list of balances in the ledger it controls.