Control Accounts

2 reason why control accounts are prepared

Define : A control account is a summary account in the general ledger (GL) . The details that support the balance in the summary account are contained in a subsidiary ledger --a Ledger outside of the general ledger .

1) The purpose of control account is to reduce details in the(GL), yet have the correct balance for P&L and BS.

2) It saves effort when the sales manager and credit manager wants to know the details and information of every individual customers ,including whether a customer recently reduced their account balance. The company can provide these individuals with access to the Debtors Subsidiary Ledger and keep the(GL) free of a tremendous amount of details.

ADV of Subsidiary Ledgers :

1) Reduces the number of accounts in the (GL) as two Largest groups *debtors & creditors* are taken out. Frees (GL) from unnecessary details because only the totals were recorded in it .

2) Making it possible to keep track of these accounts.

3) It helps the business to locate errors as each ledger contains fewer accounts than if all accounts are kept in one (GL).

4) It allows division of labor as different checks can be employed to take charge of the Ledgers