CPA- FOUNDATION LEVEL ONE

CFA-FOUNDATION LEVEL ONE

CS- FOUNDATION LEVEL TWO
FINANCIAL ACCOUNTING / PRINCIPLES OF ACCOUNTING

CONTROL ACCOUNTS

A control account keeps a total record of a number of individual items. It is an impersonal account
which is part of the double entry system. A control accounts checks the arithmetic accuracy in a
specific ledger account.

Classification of control accounts

Control accounts are used mainly for trade receivables and payables.

a. A receivables control account / sales ledger control account - is an account in which records
are kept of transactions involving all receivables in total. The balance on the receivables
control account at any time will be the total amount due to the business at that time from its
receivables.
 Format of sales ledger control account

Note that opening credit balances are unusual in the receivable control account. They represent
customers to whom the business owes money, probably as a result of overpayment of debts or
for advance payments of debts for which no invoice have been sent.

b. A payables control account / purchases ledger control account- is an account in which

records are kept of transactions involving all payables in total. The balance on this account at
any time will be the total amount owed by the business at that time to its payables.

Format of purchases ledger control account

Note that opening debit balances in the payable control account would represent suppliers who
owe the business money, perhaps because the business has overpaid or because a credit not is
awaited for returned goods.

Example 1

A payable control account contains the following entries

Shs.

Bank 79,500

Credit purchases 83,200

Discount received 3,750

Contra with receivables control account 4,000

Balance as at 31 December 2020 12,920

There are no other entries in the account. What was the opening balance brought forward in the
account as at 1 January 2020?
Example 2

Reasons for having control accounts

1. They provide a check on the accuracy of entries.

2. They assist in the location of errors.
3. Provides an internal check.
4. Provides total receivable and payable balance more quickly for producing trial balance or
statement of financial position.