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Control Accounts - Introduction

Each control account in the general ledger has its corresponding subsidiary ledger. The subsidiary ledger which is separate from the general ledger contains individual accounts of customers or suppliers who buy or supplies on credit. The control account is a summary of the detailed individual accounts in a subsidiary ledger.

There are two main subsidiary ledgers: the sales or debtors ledger/accounts receivable ledger or the purchases or creditors ledger/accounts payable ledger. In both ledgers, each customer or supplier has their own account. The control accounts for these two ledgers are the debtors control account and the creditors control account in the general ledger.

The debtors ledger records how much each debtor owes to the company while the creditors ledger records how much the company owes to each creditor. The control account deals with the totals. The debtors control account shows the total that all debtors owe to the company while the creditors control account shows the total that the company owes to all the creditors. These are the closing balances in the debtors and creditors control accounts and they must equal to the total of all the closing balances in the debtors and creditors ledgers.

As individual transactions are posted only to the subsidiary ledgers, the subsidiary ledgers therefore contain detailed information of individual transactions and debtors or creditors that are not available in the general ledger control accounts. For example, a customer paid $5,000. The debtors control account balance will now show a reduction of $5,000, but it can’t provide information as to which debtor paid the amount. The detail can only be found in the subsidiary ledger.

Only summaries of entries and total amounts are posted to the control accounts, such as total sales, total cash receipts, total returns inwards, total discounts, etc for the day, week or month from the sales ledger. The same goes for purchases ledger. Such posting procedure enables the control account to act as a check on the accuracy of the entries made in the accounts in the general and especially subsidiary ledgers.

For example, refer Sales Ledger Control Account

A company does not need to have subsidiary ledgers for only debtors and creditors. It can have several subsidiary ledgers although it usually has only one general ledger. If the need arises, a subsidiary ledger may be opened to hold separate accounts for a number of items of the same type but are different from each other in some way. Examples are an inventory or asset subsidiary ledger. Such subsidiary ledger will have a control account in the general ledger to maintain a check over the individual items.

The inventory or stock control account summarizes the total value of all the stock items. The total of the closing balances of the individual stock item accounts in the subsidiary ledger must equal the closing balance in the stock control account.

When it’s time to prepare trial balance, the total amounts of the entries in the subsidiary ledger are compared to those on the control account. For example, all the sales when added up must equal the total sales on the control account. Likewise, the total of all payments received for sales must be equal to the total cash receipts on the control account. Once no discrepancy arises, the control account totals can be used in the preparation of the trial balance.


The usefulness of control accounts cannot be denied.

  • The availability of the control account totals speeds up the preparation of the financial statements. Without the control account totals, extracting individual balances in the subsidiary ledgers would be a long and laborious task.
  • If different persons do the posting to the control accounts and the accounts in the subsidiary ledgers, fraud can be prevented or detected.
  • If totals of subsidiary ledger accounts and those of the control accounts agree, it confirms the accuracy of the postings and entries made.


Posting to the ledgers

The two day books of sales and purchases are sources for posting to the subsidiary ledgers. Each entry in the sales day book and the purchases day book is posted to the individual accounts in the sales ledger and purchases ledger respectively. The total sales from the sales column in the sales book and the total purchases from the purchases column in the purchases book are posted to the debtors control account and the creditors control account in the general ledger. It is important to remember that the total sales are posted to the debit side of the control account just as you would debit the individual sales entry in the sales book to the individual debtors’ accounts. The same applies to purchases which are credit entries.

Last Updated (Friday, 03 September 2010 19:42)