Control accounts notes - St Kevins College



Control accounts notes

Control accounts are used by accountants like suspense accounts, as a double check mechanism. They ensure that they have handled the double entries involved in credit transactions properly. This means simply that all credit transactions have resulted in a debit and a credit entry.

How it works is:

(1)each credit transaction affects a Personal account (eg Mrs Smith a/c, Mr Brown a/c) stored in the Personal Ledger also called Sales/Debtors Ledger for credit sales or the Purchases/Creditors Ledger for credit purchases. We balance all the accounts in these ledgers and add up the total from the list of balances. This figure tells us what we owe or are owed.

(2)at the same time, we add up the totals of the “Other” accounts affected by these transactions in the Books of First Entry, eg in the case of Debtors – credit sales, cash receipts, sales returns, bad debts, etc. These figures are put into a “Totals” Account called a Control account and then this account is balanced and this figure tells us what we are owed.

The two totals should agree but for the Leaving Cert, the do not. You are given a list of errors and asked to correct the control or list or both.

The Technique involved

Before starting to read the question, layout the 2 blank solution documents, eg here Debtors Control and a List of Debtors. and input the balances given.

|Debtors Control Account |List of Debtors |

|Bal bd |Original List Total |

|1000 | |

|Bal bd |???? |

|10 | |

| |Add |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| |Less |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| |Corrected Total |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

NB. There is a debit and credit balance. Odd? I thought Debtors should only have Debit balances? The credit balance represents a Debtor to whom we owe a refund, so we owe him, he doesn’t owe us. If the question says nothing about us paying the refund, then that balance will still be in place at the end of the question like this:

|Debtors Control Account |List of Debtors |

|Bal bd |Original List Total |

|1000 | |

|Bal bd |???? |

|10 | |

| |Add |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| |Less |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

|Bal cd | |

|10 | |

| | |

| |Corrected Total |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

|Bal bd | |

|10 | |

| | |

Like suspense, you must know what should have been done to be able to correct the mistake. The questions you must ask your self are:

1. Does the error affect the Personal Account, the Control account, or both? If you are not sure ask yourself if this means that the Mrs Smith a/c is wrong or the other a/c (eg Sales, Sales, Returns, Cash, etc)

2. To fix the error in either the Control or the Personal a/c do I need to increase or decrease. To increase the List, you Add (simple eh!!!), and to increase or decrease the Control, use the BookKeeping Key from Suspense.

Examples:

• Sales Daybook over totted (added up too much) by €120

• A Debtors receipt was entered as €800 not €80 in the Personal account

• Goods returned €75 were entered in the Sales Day Book as €85 and as €7 on the Debit in the Personal a/s

Try these, solutions below DON’T CHEAT !!!!!!!!

|Debtors Control Account |List of Debtors |

|Bal bd |Original List Total |

|1000 | |

|Bal bd |72 |

|10 | |

| |Add |

| | |

| | |

|Sales | |

|120 |Cash Receipt |

| | |

| |720 |

| | |

|Sales DB | |

|85 | |

| | |

| | |

| |Less |

|Sales Ret | |

|75 |792 |

| | |

| |Sales Returns |

| | |

| |(82) |

| | |

| | |

|Bal cd | |

|10 | |

|Bal cd | |

|720 |Corrected Total |

| | |

| |710 |

|1010 | |

| | |

|1010 | |

| | |

|Bal bd | |

|720 | |

|Bal bd | |

|10 | |

| | |

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download