SS1 Third Term Financial Accounting Lesson Note – Control Account

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WEEK 8

TOPIC:  CONTROL ACCOUNT

CONTENT:  Sales Ledger Control Account

Sub – topic 1. Definition and uses of Control account.

A control account is an account which contains summary or total of entries in the individual accounts in each ledger. In other words, a control account is a replica in summarized form of the accounts in the ledger to which it relates.

Theoretically the principle of control accounts could be applied to all ledgers but it is more popularly applied to sales ledger and purchases ledger. Another name for control account is TOTAL ACCOUNT or SELF BALANCING ACCOUNT or MEMORANDUM ACCOUNT

Advantages/Uses of control account

1. Location of errors: Control accounts make it possible to localize errors so that time is not wasted checking ledger(s) where there are no errors.
2. Internal check on ledgers clerk: Because control accounts are normally put under the charge of a senior official, they serve as a check against fraud by junior officials keeping the ledgers.
3. Aids to management control: For management purposes the balance on the sales ledger control account can be taken to be the total amount owed by debtors and the balance on the purchases ledger control account can be taken to be the total amount owed to creditors.
4. Saves time: It saves time and effort of drawing up the schedules of debtors and creditors and, thereby, aids the preparation of draft annual or periodic accounts.
5. Ascertainment of debtors and creditors balances: The amount owed to suppliers and money owed by customers can readily be ascertained.
6. Preparation of interim final account: Control accounts facilitate easy preparation of interim final account.
7. Ascertainment of credit sales and purchases

Sources of Information for Preparation Control Accounts

Sales ledger control account

Transaction sources of information

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