Theory question 102
Control Accounts(a) Explain control accounts.
(b) State seven items that will appear on the debit side of purchases ledger control account.
(c) State four sources for compiling purchases ledger control account.
Show the model answer
(a) A control (total) account is an account that records in total the transactions entered in the individual accounts of a ledger (sales or purchases ledger); its balance should equal the total of the balances in that ledger.
(b) Any seven: cash paid to creditors; cheques paid to creditors; discounts received; returns outwards; bills payable issued; set-offs/contra with sales ledger; opening debit balances (b/d); closing credit balance (c/d).
(c) Any four: purchases day book; purchases returns (returns outwards) book; cash book; journal proper; bills payable book.
The debit side of the purchases ledger control account lists everything that reduces what is owed to suppliers.