Control accounts notes
Control accounts are used by accountants like suspense accounts, as a double
check mechanism. They ensure that they have handled the double entries
involved in credit transactions properly. This means simply that all credit
transactions have resulted in a debit and a credit entry.
How it works is:
(1)each credit transaction affects a Personal account (eg Mrs Smith a/c, Mr
Brown a/c) stored in the Personal Ledger also called Sales/Debtors Ledger
for credit sales or the Purchases/Creditors Ledger for credit purchases. We
balance all the accounts in these ledgers and add up the total from the list of
balances. This figure tells us what we owe or are owed.
(2)at the same time, we add up the totals of the “Other” accounts affected by
these transactions in the Books of First Entry, eg in the case of Debtors – credit
sales, cash receipts, sales returns, bad debts, etc. These figures are put into a
“Totals” Account called a Control account and then this account is balanced
and this figure tells us what we are owed.
The two totals should agree but for the Leaving Cert, the do not. You are
given a list of errors and asked to correct the control or list or both.
The Technique involved
Before starting to read the question, layout the 2 blank solution documents, eg
here Debtors Control and a List of Debtors. and input the balances given.
Debtors Control Account
Bal bd
1000 Bal bd
10
List of Debtors
Original List Total
Add
????
Less
Corrected Total
NB. There is a debit and credit balance. Odd? I thought Debtors should only
have Debit balances? The credit balance represents a Debtor to whom we owe
a refund, so we owe him, he doesn’t owe us. If the question says nothing
about us paying the refund, then that balance will still be in place at the end
of the question like this:
Debtors Control Account
Bal bd
1000 Bal bd
10
List of Debtors
Original List Total
Add
????
Less
Bal cd
10
Bal bd
10
Corrected Total
Like suspense, you must know what should have been done to be able to
correct the mistake. The questions you must ask your self are:
1. Does the error affect the Personal Account, the Control account, or
both? If you are not sure ask yourself if this means that the Mrs Smith
a/c is wrong or the other a/c (eg Sales, Sales, Returns, Cash, etc)
2. To fix the error in either the Control or the Personal a/c do I need to
increase or decrease. To increase the List, you Add (simple eh!!!), and
to increase or decrease the Control, use the BookKeeping Key from
Suspense.
Examples:



Sales Daybook over totted (added up too much) by €120
A Debtors receipt was entered as €800 not €80 in the Personal
account
Goods returned €75 were entered in the Sales Day Book as €85
and as €7 on the Debit in the Personal a/s
Try these, solutions below DON’T CHEAT !!!!!!!!
Debtors Control Account
Bal bd
1000 Bal bd
10
Sales
120
Sales DB
85
Sales Ret
75
Bal cd
Bal bd
10 Bal cd
1010
720 Bal bd
720
1010
10
List of Debtors
Original List Total
Add
Cash Receipt
720
Less
Sales Returns
792
(82)
Corrected Total
710
72