Control Accounts
Overview
A business with hundreds of credit customers keeps hundreds of individual accounts in its sales ledger. Checking every single one for posting errors would take days. A control account answers the same question in one calculation: does the total owed by all those customers, calculated independently, agree with the sum of the individual balances?
In this lesson you will learn why control accounts are prepared, and how to prepare a trade receivables control account and a trade payables control account that reconcile to their respective ledgers.
Objectives
- Explain the purpose of control accounts
- Prepare a trade receivables control account and a trade payables control account
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Flashcards
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Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Control Accounts. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- What is the main purpose of a control account? A) To record cash sales B) To provide an independent check on the total of a ledger C) To calculate profit D) To list non-current assets Answer: B
- On which side of a trade receivables control account does 'discount allowed' appear? A) Debit B) Credit C) It does not appear D) Both sides Answer: B
- A trade receivables control account has opening balance $12,000, credit sales $60,000, and deductions totalling $58,500. What is the closing balance? A) $70,500 B) $13,500 C) $46,500 D) $1,500 Answer: B
- On which side of a trade payables control account does a payment to a supplier appear? A) Debit B) Credit C) It does not appear D) Both sides Answer: A
- A contra entry between the sales ledger and purchases ledger is used when: A) A customer pays by cheque B) The same business is both a customer and a supplier C) An irrecoverable debt is written off D) A discount is given Answer: B
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