Control Accounts

IGCSE ACCOUNTING
 • understand the purposes of purchases
ledger and sales ledger control accounts

• identify the books of prime entry as sources

of information for the control account
entries

• prepare purchases ledger and sales ledger

Lesson Objectives control accounts to include credit purchases
and sales, receipts and payments, cash
discounts, returns, irrecoverable debts,
dishonoured cheques, interest on overdue
accounts, contra entries, refunds, opening
and closing balances (debit and credit within
each account).
 The Sales Ledger Control Account and Purchase
Ledger Control Account summarises a set of data
drawn from the Day Books. They serve two main
The Purpose purposes:
of the 1. Large businesses use it to minimise the
Control summary postings in the general ledger.

Accounts 2. These control accounts are also used to check

for any errors or omissions for the Sales or
Purchase Ledger accounts as they derive their
information from separate sources
 Administerin
g Accounts Larger companies can set up accounting
Data departments for specific areas

Allows a
smaller Trial Trial balance figures provide a summary of
Additional purposes Balance totals, rather than individual accounts
of control accounts

Minimising
fraud Minimize the likelihood of fraud because
different staff independently maintains
control account records and the sales and
purchase ledgers.
Source of
information for
control
accounts
In the illustration, you can
see which books of prime
entry (day books) serves as
a source of information for
the control accounts.
Sales Ledger Control A/C
Sales Day Book
Sales Returns Day Book
Cash Book for Receipts from
Customers and discounts allowed
The Journal for customer account
adjustments not recorded elsewhere
(e.g bad debts)
Petty Cash book for customer small
receipts
Purchase Ledger Control
A/C
Purchase Day Book
Returns Outwards Day Book
Cash Book for Payments to Suppliers
and discounts received
The Journal for supplier account
adjustments not recorded elsewhere.
Petty Cash book for supplier small
payments
 Let’s assume that the control accounts form part of the
double-entry posting. For instance, if we take accounts
payable control account and purchases ledger account, the
accountant will do control account posting as follows:

The accountant records details of each purchase from

source documents into the book of Prime Entries, namely
the Purchases Day Book. He will then total the entries in
An example of how the Purchases Day Book.
control accounts work To keep track of every purchase, the accountant also makes
alongside the entries for each supplier in the purchase ledger. He creates
separate accounts for each supplier.
purchase ledger
The accountant records the total purchases amount in the
general ledger by debiting the Purchases account and
crediting the Accounts Payable control account.

The accountant then checks that the totals in the Accounts

Payable control account and the individual supplier
accounts in the subsidiary ledger are equal.
 Sales Ledger Control Account
Dr Cr Sales Ledger
Opening Balance $6,000 Sales Returns $900 Control Account
Credit Sales $8,500 Discounts Allowed Example
• $6,000 was owing by customers at
the start of the year with $4,000
Customer dishonoured owed by them at the end of the
cheques $500 Cash receipts $1,200
year
Bank receipts $8,400 • The Credit entries REDUCED what
is owed while the debit entries
Bad Debts Written off $200 increase this amount
• The closing balance on the credit
Contra Entries (against
accounts payable) $300 side will appear on the balance
sheet as a current asset.
Closing Balance $4,000

$15,000 $15,000
 Purchase Ledger Control Account
Dr Cr Purchase Ledger
Purchase Returns $500 Opening Balance b/f $6,000 Control Account
Cash Payments to Example
suppliers $1,500 Credit Purchases $12,000
• $6,000 was owing to suppliers at
Bank Payments to the start of the year with $2,000
suppliers $13,500 owed to them at the end of the
year
Discounts received $200
• The Credit entries INCREASE what
Contra Entries (from is owed while the debit entries
accounts recievabe) $300 decrease the amount owing
• The closing balance on the debit
Closing Balance $2,000 side will appear on the balance
sheet as a current liability.
$18,000 $18,000
Jason prepares control accounts for both his purchase and sales ledger at the end of each
month

During April, the balances brough down on the control accounts were as follows
Purchase Ledger Control Account $ 1,960 Credit
Sales Ledger Control Account $ 1,750 Debit
Sales Ledger Control Account
Total of the Day Books (Journals) for the month were as follows
$ 100 Credit
Past Paper question
Purchase Journal $ 4,190
Sales Journal $ 5,150
Attempt this question
Purchase Returns Journal $ 135
Sales Returns Journal $ 270
before seeing the answers
The Cash Book for the showed the following: on the next slide
Cheques received from debtors $ 4,990
Cheques paid to creditors $ 3,830
Cheques paid to debtors as refunds $ 100
Discounts allowed $ 110
Discounts received $ 180
A Journal entry for bad debt was written off $ 74
Prepare Jason's Purchase Ledger Control Account and Sales Ledger Control Account for
April, bringing down the balances for May.
 Purchase Ledger Control Account​

Dr​ ​ Cr​

Purchase Returns​ $ 135 Opening Balance b/f​ $ 1,960

Bank Payments to
suppliers​ $ 3,830 Credit Purchases​ $ 4,190
Answer
Discounts received​ $180 ​ ​ PLCA
Balance c/d $ 2,005

​ $ 6,150 ​ $ 6,150
 Sales Ledger Control Account​
Dr​ ​ Cr​

Opening Balance​ $ 1,750 Opening Balance​ $ 100

Credit Sales​ $ 5,150 Sales Returns​ $ 270

​ heques paid to
C
Discounts Allowed​ $ 110 Answer
SLCA
debtors as refunds $ 100 Bank receipts​ $ 4,990

Bad Debts Written off​ $ 74

​ ​ Closing Balance​ $ 1,456
​ $ 7,000 ​ $ 7,000
A control account is a general ledger account containing only summary
amounts.
The control account keeps the general ledger free of details, but still
has the correct balance for preparing the company's financial
statements.

Summary