UGBS 205

Fundamentals of Accounting Methods

Week 7– Control Accounts

College of Humanities
Business School
2017/2018
 Overview
• In a manual accounting system, there are bound to be errors
in the recording and posting of transactions to the various
ledgers. Controls are therefore set up to minimize errors in
the accounting information systems. This session examines a
type of accounting control used to check the arithmetical
accuracy of the double entry records in the ledger.

Godfred and Rita, UGBS Slide 2

 Learning Objectives
• At the end of this session, you should be able to
– Explain Control Accounts
– Understand the purpose of control accounts
– Identify and prepare the Sales Ledger/Debtors Ledger
Control Accounts and Purchases Ledger/Creditors Ledger
Control Accounts

Godfred and Rita, UGBS Slide 3

 Reading List
• Read Recommended Text –
– Chapter 16 of Marfo-Yiadom, Asante & Tackie (2015)

– Chapters 31 of Wood & Sangster (2008

• Other Financial Accounting text books available to students

Godfred and Rita, UGBS Slide 4

 Meaning of Control Accounts
• Control account refers to an account that picks the summary of all
transactions posted into the individual accounts in a given ledger.
• An A/c in the general ledger to control individual A/Cs in a
subsidiary Ledger
• Used to check the accuracy of the entries in the individual accounts
• Examples of control accounts could include:-
– The sales ledger control account, which summarizes the individual
customer accounts
– The purchases ledger control account, which summarizes the individual
supplier accounts
• It is built with the totals of all transactions that have individually
been posted into the various accounts.
Godfred and Rita, UGBS 5
 Purposes/Functions of Control Accounts

• Locate errors;
– Control A/c balance must be the same as the totals of
balances on individual A/c’s in relevant subsidiary ledger
• Provide a summary of the total of debtors and
creditors
• Cross-check to avoid fraud
• Facilitates quick decision making
• Facilitates the preparation of trial balance and final
accounts
Godfred and Rita, UGBS 6
Kinds of Ledgers & Control Accounts
• General Ledger

• Subsidiary Ledgers;
– Sales Ledger or Debtors Ledger
– Purchase Ledger or Creditors Ledger

Godfred and Rita, UGBS 7

Kinds of Ledgers & Control Accounts
Control A/Cs:
Receivables/Sales Ledger Control A/C –
Used to keep track of all transactions with credit
customers or debtors

Payables/Purchases Ledger Control A/C –

Used to keep track of all transactions with
credit suppliers or creditors

Godfred and Rita, UGBS 8

 Sales Ledger Control Account
Sales Ledger Control Account
Balance b/d xxx Balance b/d xx
Sales (credit) xxx Sales returns xxx
Cash/Bank refunds xxx Cash/Bank xxx
Bank (Dishon’d cheques) xxx Discounts allowed xxx
Interest on overdue bals xxx Balance set offs xxx
Bad debts recovered xxx Bad debts written off xxx
Bills receivables dishon’d xxx Bills receivables xxx
Balance c/d xx Balance c/d xxx
xxx xxx
Balance b/d xxx Balance b/d xx

Godfred and Rita, UGBS 9

 Sources of information for Debtors
Control Account
• Item • Source
• Opening debtors • Debtors schedule or list from the
previous period
• Credit sales • Totals on sales daybook or sales
journal for the current period
• Returns inwards • Returns inwards journal totals
• Cash and cheques received • Cashbook total for receipts from
debtors on the receipts side.
• General journal entries to that
• effect
Bad debts written off
• Cashbook debit side
• • Debtors schedule or list from the
Discount allowed
end of the period
• Closing debtors
Godfred and Rita, UGBS 10
Purchases Ledger Control Account
Purchases Ledger Control Account

Balance b/d xxx Balance b/d xxx

Purchases returns xxx Purchases (credit) xxx
Cash/Bank xxx Cash/cheque refunds xxx
Discounts received xxx Interest on overdue bals. xxx
Bills payables xxx Bills payables dishon’d. xxx
Balance set offs xxx
Balance c/d xxx Balance c/d xxx
xxx xxx
Balance b/d xxx Balance b/d xxx

Godfred and Rita, UGBS 11

Sources of information for Creditors Control
Account
• Item • Source
• Opening creditors • creditors schedule or list from
the previous period
• Totals on Purchases daybook or
• Credit purchases
purchases journal for the current
period
• Returns outwards • Returns outwards journal totals
• Cashbook total for payments to
• Cash and cheques paid to creditors on the payment/credit
creditors side.
• Cashbook credit side
• Discount received • creditors schedule or list from
the end of the period
• Closing creditors
Godfred and Rita, UGBS
12