Control Accounts

A Control Account is a general ledger account which contains a summary of all debtors or
creditors balances. The figures in a control account are taken from the totals of the books of
first entry, i.e. sales journal, purchases, returns journal, cash book and general journal. They
are compared with the list /schedule of all the individual customer/suppliers accounts.

The purpose of control accounts

 They act as a check on the accuracy of the ledgers (the balance of the control account
should equal the total of all individual accounts).
 They help localise errors and find them quickly.
 They prevent fraud by spreading work among staff
 They provide an up to date figure or summary of trade receivable and trade payable
 They help locate missing items from incomplete records.

Uses / Advantages of Control Account

 Control accounts provide a check on the internal accuracy of the ledger accounts
 They identify the ledger or ledgers in which errors have been made when there is difference on
trial balance
 Provide the final balances of customer or suppliers
 Limit the frauds or deception with respect to sales and purchases or cash / cheque payments or
receipts
 Any missing figure such as credit sales or credit purchases can be identified
 To provide information quickly and speed up preparation of final accounts and trial
balance.
Limitations/Drawbacks of Control Account
 If the system of maintaining day books, ledgers and control accounts are prepared by the same
group or individuals, the frauds might not be restricted
 Control accounts are only limited to customer and suppliers, they do not focus on other items
such as stocks, or accruals.
 The arithmetical accuracy of the total of sales ledger balances cannot be checked in the
absence of double entry system.
 Control accounts cannot check individual trade receivables and trade payables balances.

Page 1
Control Accounts

Sales Ledger Control Account (Trade receivable control account

Sales Ledger Control Account Source of Information
(Items included)
Opening balances Total of balances in accounts receivable under sales ledger
Credit sales Total of sales daybook
Return Inwards Total of sales return daybook
Irrecoverable Debts / Irrecoverable General Journal
Debt Recovered
Bank and Cash received from Cash Book (Receipt side)
customer
Discount Allowed Cash Book (Receipt Side)
Interest on overdue account from General Journal
account receivable
Set off / Contra General Journal
Closing Balance Total of balances in accounts receivable under sales ledger

Sales Ledger Control Account

Date Details $ Date Details $
Balance b/d (majority balance) xxx Balance b/d (minority balance) xxx
Credit Sales xxx Sales Return/return inwards xxx
Dishonoured Cheque xxx Irrecoverable debt xxx
Interest on overdue acccount xxx Discount Allowed xxx
Refund to customer xxx Receipt (Bank and Cash) xxx
Contra/set off xxx
Balance c/d(minority balance) xxx Balance c/d (majority balance) xxx
------ ------
xxx xxx
=== ====
Balance b/d (majority balance) xxx Balance b/d (minority balance) xxx

Why there is a minority balance in Trade receivable control account?

Credit balance are unusual in the trade receivables control account and may occur for the following
reasons:
1. When a customer return goods after effecting payment.
2. Overpayment by customers.
3. Advance payment by customer
4. Errors in the customer’s account

Items which do not appear in the sales ledger control account.

1. Cash sales (total sale = credit sales + cash sales)
2. Sales return in respect of cash sales.

Page 2
Control Accounts

3. Allowance for irrecoverable debt (Provision for doubtful debts)

Purchases Ledger Control Account (Trade payable control account)
Purchases Ledger Control Source of Information
Account
(Items included)
Opening balances Total of balances in accounts payable under purchases ledger
Credit Purchases Total of purchases day book
Return Outwards or Purchase Total of purchases return day book
Return
Bank and Cash paid to suppliers Cash Book (Payment side)
Discount Received Cash Book (Payment Side)
Interest charged by suppliers General Journal
Closing Balance Total of balances in accounts payable under purchases ledger

Purchase Ledger Control Account

Date Details $ Date Details $
$ Balance b/d (majority balance) xxx
Balance b/d (minority balance) xxx Credit Purchases xxx
Purchases Return xxx Interest charged. xxx
Discount Received xxx Refund by supplies xxx
Payment(Bank and Cash) xxx Balance c/d (minority balance) xxx
Contra/set off xxx
Balance c/d (majority balance) xxx
------ ------
xxx xxx
=== ====
Balance b/d (minority balance) xxx Balance b/d (majority balance) xxx

Why there is a minority balance in Trade payable control account?

Credit balance are unusual in the trade payable control account and may occur for the following
reasons:
1. Additional discount was allowed after effecting payment.
2. Overpayment by the company to supplier
3. Advance payment to supplier
4. Errors in the supplier’s account.

Items which do not appear in the Purchase ledger control account.

1. Cash purchases (total purchases = credit purchases + cash purchases).
2. Purchases return in respect of cash purchases.

Page 3
Control Accounts

Contra / Seff off: A contra settlement occurs whenever a person is both trade receivable and trade
payable. In that case, always use the lower of the two balances to set off against each other so that at
the end either the person owes the business or the business owes the person.
Double Entry
Dr Trade payable control account
Cr Trade receivable control account

Memorandum accounts
This is a separate list of individual receivable and payable amounts due from each customer and to
each supplier, respectively. This simple 'list of balances' is used as a record so that companies know
how much each customer is due to pay and how much they are due to pay each supplier. This assists
with credit control and cash flow management

Reconciliation of control account with ledger account

Sometime the total balances in the control account and total individual account in the ledgers (sales or
purchases) do not agree. This could be because there be may errors that have been made when
preparing control account or when posting transaction in individual account (personal account). In that
case, a reconciliation should be made to clear all errors and mistakes that have been made either in the
control account or ledger (individual account/personal account).

In an attempt to make reconciliation, the following rules should be used:

1. Prepare an adjusted control account (sales ledger control account or purchases ledger control
account) in which the following errors should be recorded:
a. Errors made in the original control account.
b. Errors in calculating the total of an item in a subsidiary book.
c. Errors made in sales account, purchases account, return inwards account, return outwards
account, discount allowed account, discount received account.
d. Omission of an item in a subsidiary book. (purchase journal, purchase return journal, sale
journal, sale return journal, general journal, Cash/bank)
e. Sale journal or purchase journal/ purchase day book

The above are errors that affect more than one customer account or more than one supplier
account.
2. Prepare a statement starting with the total of the individual balances (personal account) to reconcile
it with the adjusted control account balance. The following errors are to be recorded on the statement:
a. Errors made on the list /schedule of individual customer/supplier balances.
b. Errors in individual account, personal account, customer account, supplier account which are found
in sale ledger/purchases ledger.

The above are errors which affect only one customer or supplier account

Page 4
Control Accounts

Note : sales ledger = customer account/ Purchases ledger = supplier account.

If completely omitted in both, entries should be made in both account.
Format
Statement to reconcile sale ledger control account with sale ledger balance.
Details Add Less Net
Original balance 67660
Sale invoice omitted 100
Sales understated 200
Bank omitted 200
300 (200) 100
67760

Question type
State two ways in which control accounts can be used by Kya in her business.
State two reasons why Andrea prepares a sales ledger control account.
State two advantages of preparing control account
Advantages of preparing purchase ledger control account
Why maintain a sale ledger control account
Answer

 Accuracy (1)
It identifies the ledger or ledgers in which errors have been made when there is a difference in Trial
Balance. (1).

 Prevention of fraud (1)

Segregation of duties helps in the prevention of fraud because members of staff who complete the
control accounts are not involved in completing the sales ledger (1).

 Availability of management information (1)

It provides a total of trade receivables and trade payables to be used in the trial balance and financial
statements (1).

 Division of Labour
It facilitates the division of labour within the accounting function

Q2 State two sources of information for the sales ledger control account.
Ans:nSales journal, Sales returns journal, Cash book, General journal and Balance from sales ledger
control account of last year

Q3

Page 5
Control Accounts

State why a Sales Ledger Control Account may have both a debit and a credit closing balance [1]
NOVEMBER 1998 P2 Q4 (b)
OR
State three possible reasons why a trade receivable's account might have a credit balance [3]
MAY 2008 P2 Q2 (b)
OR
State three reasons why there might be a credit balance on a customer’s account in the sales ledger. [3]
MAY 2017 P21 Q3 (c)
Ans:
 Overpayment
 Payment in advance
 Credit note issued
 Deposit received etc.
 Over/duplicated payments by customers
 Return of goods after full payment.

Q4 Explain the meaning of a contra entry in connection with control account and explain why
such entry may be made (here in the first part it asked you to prepare a sale ledger control
account, this is why I reply in connection to a sale ledger)
Ans:
A contra entry is when an account in the sale ledger is set against an account in the purchase ledger.
Such an entry is made when a supplier is also a customer of the business and has an account in both
ledgers.

Q6 Suggest why Vijay Sing charged a credit customer interest

Ans: The customer had not paid the balance owed by the end of the period of credit allowed

Q7 State two reason why Vijay does not use the information contained in the sales ledger to
prepare the sale ledger control account.
Ans
An error in the sale ledger would not be revealed
Any fraud would not be revealed

Q8 Explain why the information used to write up Suzie chow’ sale ledger control account is
obtained from the books of prime (original) entry and not from the sales ledger.
Ans
The sale ledger control account acts as a check on the sales ledger. If there is an error in the sales
ledger it will be revealed by the control account prepared from the individual account in the ledger.

Page 6
Control Accounts

Q9 State one advantage of dividing the ledger into these three sections (general ledger, sale
ledger, purchase ledger)
Ans:
Work can be shared amongst several people
Easier for reference as the same type of account are kept together
Easier to introduce checking procedures
Reduce the possibility of fraud

Q10 State why a sales ledger control account does not contain an entry for a provision for
doubtful debts.
Ans:
A provision for doubtful debts does not affect an individual trade receivable’ account

Q11 State why discount allowed was given.

Ans
Payment was made before specified date

Q12 Name the prime books of entry

Ans on page 2 and 3

Q13 Suggest on advantages of paying credit supplier before the due date.
Ans
May be able to take advantage of cash discount and improve the relationship with suppliers
Avoid paying interest

Q14 Suggest one disadvantage of paying credit suppliers before the due date
Ans
The business is deprived of the use of money earlier than necessary

Q15 Meena is considering charging interest on the full account balances of her customers who do not
pay promptly.
REQUIRED
(d) Advise Meena whether or not she should take this course of action. Justify your answer.

May improve trade receivables collection period.

Improve cash flows

Meena may lose customers

May need tighter credit control which may increase cost

Page 7
Control Accounts

Charging of interest will expedite payments from trade receivables resulting in improved cash flows
and reduction in receivables collection period. On the darker side Meena may lose her customers.
Meena should also consider market and industry trends before making the final decision.

Q16
(i) Explain the purposes of the journal. [2]
(ii) State two examples of transactions which would be recorded in the journal, other than the
purchase of non-current assets on credit. [2]
MAY 2014 P22Q2(a)
OR
State two types of entries, other than the correction of errors, which would usually be recorded in the
general journal [2] MAY 2016 P22 Q1(c)

SOLUTION
Mark Scheme
(i) It is used to record the double entry (1) of non-routine transactions (1) [2]

(ii) correction of errors (1)

Opening entries (1)
Purchase and sale of non-current assets (1)
Non-regular transactions (such as year-end transfers) (1)
Calculating opening capital (1)
Write off bad debts (1)
Depreciation (1)

Q 17 State two types of errors that will not be identified by producing a sales ledger control A/c. [2]
NOVEMBER 2016 P21 Q2(c)
SOLUTION
Mark Scheme
1 Error of omission (1)
2 Error of commission (1)
3 Compensating error (1)
4 Error of original entry (1)
5 Error of principles

Page 8
3 Meena did not keep full accounting records. She was advised to keep her books of account using
the double entry system.

REQUIRED

(a) State three benefits a business gains from maintaining a system of double entry
book-keeping.

[3]

Additional information

Meena now uses the double entry system of book-keeping. At the end of January the total of the
balances in the sales ledger was $34 524. However, the balance on the sales ledger control
account was $33 205.

On investigation she found the following errors:

1 The sales journal had been undercast by $1649.

2 A cheque received had been correctly entered in the cash book as $650 but was entered in
the sales ledger as $560.

3 An irrecoverable debt, $420, had been written off in the sales ledger but not entered in the
control account.

4 A credit note issued for $160 had been completely omitted from the books of account.

© UCLES 2017 9706/21/M/J/17

Page 9
 REQUIRED

(b) Prepare a reconciliation between the sales ledger control account and the sales ledger
balances at 31 January.

Sales ledger control account

Description Add ($) Less ($) Total ($)

Opening balance 33 205

Sales ledger balances

Description Add ($) Less ($) Total ($)

Opening balance 34 524

[6]

© UCLES 2017 9706/21/M/J/17 [Turn over

Page 10
2 Lawrence provided the following information at 30 November 2018.

$
Purchases ledger control account balance 16 970
Sales ledger control account balance 42 350

These did not agree with the list of balances taken from the purchases ledger and sales ledger
respectively. The following items were discovered:

1 A discount received of $280 had been omitted from the books.

2 A credit note for a sales returns of $230 had been treated as a sales invoice and entered in
the sales journal.

3 An irrecoverable debt of $190 had been written off in the sales ledger. No entry had been
made in the control account.

4 A contra entry for $1070 had been debited twice in the purchases ledger control account.

5 A payment of $120 to a credit supplier had not been recorded.

6 Discount allowed of $70 had been posted to the debit side of both the sales ledger control
account and the purchases ledger control account.

7 Lawrence owes Kalim $380 and Kalim owes Lawrence $1590. They have agreed to set off
the balance, on Lawrence’s account in Kalim’s sales ledger.

8 A customer’s dishonoured cheque had been entered in the cash book as $1560 instead of
$1650.

REQUIRED

(a) (i) Prepare the corrected purchases ledger control account at 30 November 2018.

$ $

DA 280 Balance b/d 16 970

bank 120 contra 1070

contra 380 DA 70

balance c/d 17 330

18 110 18 110

balance b/d 17 330

[4]

© UCLES 2019 9706/21/M/J/19

Page 11
 (ii) Prepare the corrected sales ledger control account at 30 November 2018.

$ $

Balance b/d 42 350 sale return 460

irr debt 190

DH 90

DA 140

contra 380

balance c/d 41270

442440 42440

balance b/d

[5]

(b) Explain what is meant by the term ‘error of commission’.

[2]
A customer’s dishonoured cheque had been entered in the cash book as $1560 instead of
$1650

decrease
increase decrease increase
dr SLCA cr dr cr

1560
90

© UCLES 2019 9706/21/M/J/19 [Turn over

Page 12
2 Answer Section A and Section B. For
Examiner’s
A The sales ledger control account of Dream Beds for the year ended 31 December 2010 Use

is shown below.

$ $
Jan 1 Balance b/d 43 900 Dec 31 Sales returns 28 510
Dec 31 Sales 522 650 Bank 436 300
Bank (dishonoured cheques) 2 200 Discount allowed 28 800

Bad Debts 8 400

PLCA 3 210
Balance c/d 63 530
568 750 568 750

The schedule of trade receivables (debtors) extracted from the sales ledger at
31 December 2010 totalled $61 140.

The following errors were subsequently discovered:

1 A sale of $750 had been entered in John’s account in the sales ledger as
$570. The correct entry had been made in the sales journal.

2 An entry of $850 was correctly entered in Samera’s account in the sales ledger,
closing the account owing to Samera’s bankruptcy. No other entry had been
made.

3 A sum of $120 discount allowed had been debited to Beach’s account in the
sales ledger. The correct entry had been made in the cash book.

4 At 31 December 2010 the balances in Richard’s accounts were:

$
Purchases Ledger 2680 Credit
Sales Ledger 1980 Debit

It was decided to set off Richard’s balance in the sales ledger against the
balance in the purchases ledger. No entries had been made.

5 Goods to the value of $800 were sold to Claire in June 2010, and the account
had not yet been paid. Interest charges of $30 are to be applied on the overdue
account, but no entries for this had yet been recorded.

In addition a provision for doubtful debts of 10% on the new outstanding

balance is to be created.

6 Dream Beds had sent goods with a selling price of $400 on a sale or return
basis to Majit. Majit had not yet signified any intention to purchase the goods.
Dream Beds had considered the goods as sold, and made the relevant
accounting entries.

7 A page in the sales returns journal in October 2010 had been undercast by
$1600. No correction had yet been made.
(a) Prepare the corrected sales ledger control account for the year ended 31 December 2010
(b) Prepare a statement reconciling the schedule of trade receivables (debtors) total with
the corrected balance in the sales ledger9706/22/O/N/11
© UCLES 2011
control account.

Page 13
 8

2 Hamid prepares control accounts to check the accuracy of his business’s purchases and sales
ledgers.

REQUIRED

(a) Explain two benefits to a business of using control accounts other than checking the
arithmetical accuracy of ledger accounts.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

Additional information

On 31 January 2021 Hamid provided the following information:

1 The balance of the sales ledger control account on 1 January 2021 was $17 820.

2 Totals for January 2021 from books of prime entry

$
Cash book
Discount allowed 430
Receipts from trade receivables 16 230
General journal
Contra entries with purchases ledger 890
Sales journal 18 440
Sales returns journal 310

3 On 31 January 2021 a credit customer had overpaid his account by $170.

© UCLES 2021 9706/23/M/J/21

Page 14
 9

REQUIRED

(b) Prepare the sales ledger control account for January 2021.

Sales ledger control account

$ $

DA 430
balance 17 820

credit sale 18440 bank 16230

contra 890
sale return 310

balance c/d 170 balance c/d 18570

36430 36430

balance b/d 18 570 balance b/d 170

[6]

Additional information

On 31 January 2021 the total of balances in the purchases ledger was $12 860, but the balance of
the purchases ledger control account on this date was $12 980.

The following errors were discovered.

1 The total of the discounts received column of $110 had not been posted from the cash book.

2 The total of the purchases returns journal had been overstated by $250.

3 Interest of $130 charged by a supplier because of an overdue balance had been debited to
the supplier’s account.

© UCLES 2021 9706/23/M/J/21 [Turn over

Page 15
 10

REQUIRED

(c) Prepare statements to show corrected totals for:

(i) the purchases ledger balances

Correction of purchases ledger balances

Details $

Incorrect total 12 860

interest 260

correct 13120

[2]

(ii) the purchases ledger control account balance

Correction of purchases ledger control account balance

Details $

Incorrect balance 12 980

DR (110)

purchase return 250

correct
13120

[3]
decrease
dr PL increase cr
[Total: 15]
xxxx
interest 130 interest 130
interest 130

© UCLES 2021 9706/23/M/J/21

Page 16
 12

3 Martina has prepared the following sales ledger control account for the month of August 2021. All
sales are on credit.

Sales ledger control account for the month of August 2021

$ $
Balance b/d 14 280 Sales returns journal 210
Sales journal 9 540 Bank 11 860
Discounts received 280
Balance c/d 11 470
23 820 23 820
Balance b/d 11 470

Martina produced a list of all customer account balances at 31 August 2021 totalling $10 020.

She discovered that the following errors had been made in the records.

1 Discounts allowed of $1190 had been entered in customers’ accounts but had not been
entered in the control account.

2 A credit transfer from a customer of $420 had been correctly entered in the cash book but
had been credited to the customer’s account as $240.

3 A credit balance of $60 on a customer’s account had been recorded on the list of balances as
a debit balance.

4 A contra to the purchases ledger of $860 had been entered in the customer’s sales ledger
account but had not been entered in the control account.

5 A cheque received from a customer of $380 had been returned unpaid by the bank. No entries
had been made in Martina’s books of account in respect of the unpaid cheque.
refund to customer
6 Martina had sent a cheque for $20 to a customer who had overpaid his account. The payment
had been correctly processed in both the cash book and the customer’s account but had
been posted to the purchases ledger control account in error.

© UCLES 2021 9706/21/O/N/21

Page 17
 13

REQUIRED

(a) Prepare an adjusted sales ledger control account.

Sales ledger control account

$ $
Balance b/d 11 470 DA 1190

DH 380 PLCA 860

refund 20
DR 280

balance c/d 10100

12 150 12 150

balance b/d 10100

[6]

(b) Prepare an adjusted list of sales ledger balances to agree with the adjusted sales ledger
control account balance in part (a).

$
Original total of sales ledger balances 10 020
bank wrongly posted (180)

credit balance correction (120)

DH
380

Adjusted total of sales ledger balances 10100

dr increase SL decrease
[4]
cr

60 xxxx
60 cancel
60 correction

© UCLES 2021 9706/21/O/N/21 [Turn over

Page 18