control account

With accounts receivable, as invoices go out the control account is debited, which increases the balance. And as payments come in, the control account is credited, decreasing the balance. The details of a control account will be found in a corresponding subsidiary ledger. The control account keeps the general ledger clean of details, but contains the correct balances used for preparing a company’s financial statements. You can set a value for nexus only if the Advanced Taxes feature is enabled. If your NetSuite account does not use the Advanced Taxes feature, the value for nexus is set automatically and will always be the same for all your tax control accounts.

The examples above are very basic and are standard double-entry accounting transactions. The sale will be recorded as a credit entry (as normal) but what about the corresponding debit? It would not be posted to the bank account as no physical cash has gone to the bank account, or the petty cash account… Once you have a good understanding of debits and credits and the basics of double-entry bookkeeping, then you may be ready to understand and start using control accounts. If you are still new to bookkeeping and accounting, I suggest you take my free bookkeeping course. Complete Reversal of Entries
The correct amounts are entered in the correct accounts, but each item is shown on the wrong
side of each account.


So, it will tell you the total collections and total receivables you owe from your customers. For example, a company that extends credit to its customers will usually have an accounts receivable control account as well as an accounts receivable subsidiary ledger. The same steps followed during the preparation of receivable control account is used in this case. The only difference between the two types of control accounts is the nature of transactions which take place for payable control accounts.

  • There are various advantages of control accounts, including preventing fraud, eliminating clutter, and quick identification of accounting errors.
  • With that in mind, today we offer a detailed explanation of the differences between accounts receivable and a control account.
  • Instead, further information will be stored in the Accounts Receivable subsidiary ledger.
  • This means that if the total debits equal total
    credits before a journal is made then they will still be equal after the journal entry is made.
  • A journal entry must
    then be made in the nominal ledger to correct the control account and the
    corresponding sales or expense account.

The control account keeps the general ledger free of details, but still has the correct balance for preparing the company’s financial statements. Control accounts are an important component of double-entry accounting and make up the foundation of the general ledger. They serve as a summary report of the total balances for each subledger, and allow for a streamlined analysis of a company’s balance sheet without all of the clunky details contained in each subledger.

What is the Purchase Ledger Control Account?

Also, this account is called a controlling account since it promotes the performance of reconciliation control concerning the ending balance. Therefore, this account enables individuals to reconcile the total balance of the subsidiary ledger with the aggregate balance to be applied within the trial balance. A control account is created as a tool for reconciling the journal entries and the general ledger. Reconciliation is an operation that ensures that entries within purchase and sales ledgers agree with the control accounts entries. Hence, this account ensures the aggregate amount is similar, and if there is no similarity, it indicates the error-promoting correction and investigation of all discrepancies. With current accounts receivable balances, a corporation can have hundreds or thousands of clients.

The fundamental purpose of a control account is to aid in the detection of mistakes in subsidiary ledgers. However, they also provide additional benefits to a company, such as the ability to extract a single trial balance from the general ledger. Only the accounts whose control account does not reconcile need to be examined for mistakes if the trial balance does not balance.

Chapter 14 – Control Accounts

A common example of a control account is the general ledger account entitled Accounts Receivable. With the double-entry accounting system, accounts receivable, and accounts payable are the common types of control accounts. Control accounts are most commonly used to summarize accounts payable and accounts receivable as these tend to contain a lot of transactions. Therefore they are separated into subsidiary ledgers rather than clutter up the general ledger with too much detailed information.

Which accounts are control accounts?

  • Accounts Receivable.
  • Accounts Payable.
  • Inventory.
  • Fixed Assets.
  • Payroll.

The bookkeeper of a business knows where to post one side (e. Credit Side) of a
transaction, but does not know where to post the other side (e. Debit Side). For
example, a cash payment might be made and must obviously be credited to cash. But
the bookkeeper may not know that the payment is for, and so will not know which
account to debit. Which means a double posting if the control account has to be corrected, and a single
posting if it is the individual’s balance in the memorandum that is at fault. A control account is however an (impersonal) ledger account which will appear in the nominal

A exists for both creditors and debtors and is used to ensure that there are no errors in the ledgers (that any sub-ledgers match up with the general ledger). A control account is a general ledger account containing only summary amounts. The details for each control account will be found in a related (but separate) subsidiary ledger. They show the balance of transactions detailed in the corresponding subsidiary account.

control account

Also, businesses with many creditors should adopt maintaining the individual entries by placing totals within the creditors control account. A creditors control account refers to a ledger account that indicates the sum of the creditors’ transactions within the master ledger. On the other hand, a stock control account depicts the total value of the stock items. An incorrect amount may be posted to the control account because of a miscast of the
total in the books of original entry (i. adding up incorrectly the total value of invoices
or payments).

A transposition error may occur in posting an individual’s balance from the books of
prime entry to memorandum ledger, e. A sale to C Cloning of $250 might be posted to
his account as $520. The sum of the balances extracted from the memorandum must be
corrected. No accounting entry would be required to do this, except to alter the figure
in C Cloning’s account. The value for country is derived from the nexus value and is read-only.

Otherwise a suspense account has to be opened first, and later
cleared to a journal entry. In fact, the journal entries should be made before completing the
double entry accounts for the transaction. The journal requires a debit and equal credit entry
for each ‘transaction’, i.

Categories: Bookkeeping


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