PRINCIPLES OF ACCOUNTS.
Control account is defined as total account inserted in a ledger to make it self balancing. Balance of this account should be similar to the totals of the details balance of the ledger giving proof of arithmetic accuracy of the book-keeping entries in the ledger.
Control account in the general ledger represent the total of all the accounts in some other ledgers. Accuracy of the ledgers is proved by the control accounts and they are also called self-balancing ledger or adjustments accounts
The two control accounts maintained in general ledger are
- Sales/Debtors ledger control account.
- Purchase/Creditors ledger control account.
Control accounts are balanced off at the end of every month. Balance carried down which is a debit balance in the debtors ledger control account must be equal to the total of all debit balances in the personal account in the debtors ledger. Similarly credits and balance carried down in the creditors ledger control account must be equal to the total of all credit balances in the personal account in the creditors ledger.
Agreement between balance in the control account and total of all balances in the respective ledger indicates the accuracy of all transactions recorded in the ledger control account are also helpful to enable the management to detect fraud and disparities. If a person in charge of any particular ledger wants to make some incorrect entries to disguise some fraud then control account will disclose such efforts.
When writing up control accounts one needs to put in mind that’s like writing up a personal account but in totals meaning debit in the personal account will also be a debit in the control account. For example credit sales to a particular debtor are debit to his personal account and total credit sales to all debtors are debited to debtors ledger control Account.