PMP® Terminologies Relating to Cost Knowledge Area

control account

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control account

At the end of each month, balances brought down (ie bal. b/d) are extracted. This procedure continues for all the twelve months for each individual creditor account. Just as it is in the case of debtor/receivable control accounts, the daily transactions related to creditor/payable control are treated in the same manner. Control accounting both helps produce clean financial reports, and provides checks and balances for accurate reconciliation. In the case of an accounts receivable control account, the subtotal of the customer balances in the subledger must match up to the control account.

Why Prepare Control Account?

This control account is then reflected in the general ledger and financial statements as a single accounts receivable balance. A control account is a type of account in the general ledger that exclusively reflects the balance of one or more related subsidiary accounts. Companies keep records of their transactions in subsidiary ledgers, consolidated and summarized into the corresponding control account. The same steps followed during the preparation of receivable control account is used in this case.

The keeps the general ledger free of details, but still has the correct balance for preparing the company’s financial statements. For financial reports, the summary balances provided by the control accounts are generally all that’s needed for analysis. The ending balance in a control account should always match the ending total for its subsidiary ledger. If it doesn’t, then there could have been a mistake made during the calculations. When you account for any financial transaction of a business, company, or other entity, you always need a debit entry and a corresponding credit entry…

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A debtors control account denotes an account within the master ledger that illustrates transactions owed by debtors. Debtors control accounts are also termed receivable control accounts or sales ledger control accounts because transactions among debtors are conducted daily, monthly, or within a specified financial period. The typical level of activity in a control account is on a daily basis. For example, all payables entered during one day will be aggregated from the subsidiary ledger and posted as a single summary-level number into the accounts payable control account. A control account is a general ledger account that contains the summarized amounts of transactions made within the business. Also, this account is called a controlling account since it promotes the performance of reconciliation control concerning the ending balance.

control account

The general ledger can have hundreds of accounts from asset and liability accounts to income and expense accounts. More over, each account type can have hundreds of smaller accounts called subsidiary accounts. If every single account was included in the general ledger, it would be very large, unorganized, and difficult to use. That is why control accounts are used to summary data from large numbers of related accounts. A large organization with several complex operations may have a general ledger that contains many control accounts, such as accounts receivable, based on various sub-ledgers.

Creditors Control Accounts

However, if you’re still using a manual ledger system, the purpose of control accounts is to take the balance of the accounts in the subsidiary ledgers and post the total into the general ledger. Doing this allows you to produce a trial balance and balance sheet without all of the transactions displayed. In accounting, the controlling account (also known as an adjustment or control account[1]) is an account in the general ledger for which a corresponding subsidiary ledger has been created. The subsidiary ledger allows for tracking transactions within the controlling account in more detail. Individual transactions are posted both to the controlling account and the corresponding subsidiary ledger, and the totals for both are compared when preparing a trial balance to ensure accuracy. At the end of the reporting period, all these individual accounts are transferred to the accounts receivable control account.

What does a control account contain?

A control account is a summary-level account in the general ledger. This account contains aggregated totals for transactions that are individually stored in subsidiary-level ledger accounts.

Therefore, this account enables individuals to reconcile the total balance of the subsidiary ledger with the aggregate balance to be applied within the trial balance. A control account is created as a tool for reconciling the journal entries and the general ledger. Reconciliation is an operation that ensures that entries within purchase and sales ledgers agree with the control accounts entries.

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As the business expands the accounting requirements increase which may lead to more errors occurring which are very difficult to find. Custom control accounts can be useful additions to your chart of accounts. A control account in Manager is a top-level, balance sheet account containing subsidiary ledgers or subaccounts.

They must also ensure that the amount listed in the control account is the total of each of the amounts owed by a business to each supplier. In the creditor’s ledger, the monthly recordings are distinguished using a number line, while the individual creditors are differentiated using several categories of digits such as 1 to 10. Instead, further information will be stored in the Accounts Receivable subsidiary ledger.

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