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Purpose
A control account summarises a large number of transactions. This account is used to prove the accuracy of the ledger accounting system.
Main Entries in Control Accounts
Credit Sales
Dr. Receivables Control Account
Cr. Sales
Cash received
Dr. Bank/Cash
Cr. Receivables Control Account
Other Entries
Contra
Dr. Payables control account
Cr. Receivables control account
(for the maximum common amount)
Control Account Reconciliations
Control accounts and double entry
Control Accounts
Most businesses operate control accounts for trade receivables and payables, but such accounts may be useful in other areas too, e.g. sales tax control account.
Reconciliation between the control account total and the receivables ledger will help to detect errors, thus providing an important control.
Credit Purchases
Dr. Purchases
Cr. Payables control account
Cash paid
Dr. Payables control account
Cr. Bank/Cash
Credit Notes and refunds
Dr. Returns Inwards (Sales returns)
Cr. Receivables control account
(when a credit note is given)
Credit Notes and refunds
Dr. Receivables control account
Cr. Bank
(when the customer is refunded)
Interest charged on overdue accounts
Dr. Receivables control account
Cr. Interest receivable (Income I/S)
Errors
Errors which affect the control accounts
Over/undercast Sales day book, Purchaes day book, Cash book
Transposition error in posting total from Sales day book, purchases day book, Cash book to nominal ledger.
Entry omitted from Sales day book, Purchaes day book, Cash book.
Errors which affect the list of balances (receivables/payables ledger)
Omit balance from the list
List a debit balance as a credit/vice versa.
Transposition error in filling ledger from books of prime entry.
Errors which affect both the lists of balances and RLCA/PLCA
Details being incorrectly recorded on the original source documentation i.e. sales/purchase invoice.
Loss of original source documentation so it is not recognised anywhere in the system.
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Control Accounts
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