A-Level会计-审计Control Accounts。

Revision: Control Accounts

For a small firm, the trial balance alone may prove sufficient in providing a check on the numerical accuracy of the ledger accounts. Whilst still useful, the trial balance will not necessarily speed up the location of errors.

If a firm operates ledgers for sales, purchases and general accounts then control accounts can be used as a further check on the accuracy of the ledgers. In effect, a control account is like a trial balance for each of the sales and the purchases ledger. If the control account does not tally with the accounts in each ledger, then an error will exist in that ledger.

Two control accounts

Sales ledger control account (also known as the total debtors account)

Purchases ledger control account (also known as the total creditors account)

Each control is a summary total of the respective ledger. It has the totals for all balances and all entries as found in the sales or the purchases ledger. It is easier to imagine them as an overall debtor account (for the sales ledger account) or an overall creditor account (for the purchases ledger account).

Construction of control accounts

The information for constructing each control accounts are taken from both the personal accounts of debtors and creditors, as well as information form the main daybooks (e.g. sales daybook for total of credit sales). The main sources of information are found in the following locations:

……

A control account will appear as if it is a personal account - with amounts relating to purchases and sales, returns, discounts as well as payments made and received. The examples below are to remind you of what a debtor and what a creditor account looks like:

……

(*1 this is a debit balance but it is initially carried down from the credit side when the account is balanced off)

……

(*2 this is a credit balance but it is initially carried down from the debit side when the account is balanced off)

Set-offs

Some firms may find that they have customers who are also suppliers. In this case, there

will be an account for this firm or person both in the sales ledger (as a customer) and in the purchases ledger (as a supplier). It could appear to be common sense that rather than both parties send a cheque to each other, the amounts owing (both to and by the firm) should be partly offset against each other. If you owe someone £5 who also owes you £10, then it would be sensible for you to offset the debt and accept £5 in full settlement of both debts. This can also be achieved with firms and are known as set-offs.

As a general rule, set-offs will appear in both control accounts and on the following sides:

In the sales ledger control account - on the credit side

In the purchases ledger control account - on the debit side

Memorandum records

For some firms, the control account will be used as a check on the numerical accuracy of the sales and purchases ledger. The control account in this case is not part of the double-entry system. In this case, the control accounts would be known as memorandum records - they are simply there as a back up to the normal double entry system.

However in some larger firms, all the control accounts are kept as an integral part of the double-entry system of bookkeeping. The personal accounts as found in the sales and purchases ledger would then become the memorandum records and would be used for information only. Here, the control accounts, as found in the general ledger, would be used for the trial balance and so on.

Benefits of maintaining control accounts

If the control accounts are kept purely as memorandum records then they are not necessary for the double entry system to function fully. However the control accounts will still have some uses for the firm and these are as follows:

1. If the control accounts do not balance then it is obvious that a mistake has taken place in the respective ledger. This will save time in the locating of the error. If we relied on the trial balance alone then we would have to check all the three main ledgers as well as the cashbook.

2. Control accounts can be kept by a person who is not he same person who maintains the personal accounts of debtors and creditors. In this case, fraud is less likely to occur (unless both the ledger clerks and the person maintaining the control accounts are in collaboration together!).

3. The debtors and creditor figures can be ascertained more speedily for construction of the trial balance, than having to balance off each individual personal account in the sales and purchases ledgers.

4. Errors not affecting the trial balance

5. Given the many entries that are made in the ledger accounts, it is not surprising to know that errors will be frequently made when making these entries. Most firms, even if using computerized system will make mistakes in the double entry accounts. Fortunately, there are various ways in which an account can be checked

or verified, such s the use of control accounts, bank reconciliation statements and the trial balance.

6. When errors are made, they will have an effect on the final accounts of the firm, possibly giving us an incorrect profit calculation. Understandably, it is important to correct these errors as soon as they are found.

7. In double entry bookkeeping, the trial balance can be used to check the accuracy of the ledger accounts. If the totals of the debit column and the credit column of the trial balance disagree (are not the same) then mistakes must have been made in the entries. However, even the totals agree (both columns total the same figure) mistakes may still have been made. There are various ways in which entries can be made which follows basic rules of double entry (one debit and one credit entry - both same amount) but still produce mistakes. The errors that do not affect the trial balance agreement are normally classified as follows: 　　……

8. Once an error has been located, it will need to be corrected with both an entry in the journal (regardless of the original transaction) and also in the ledger accounts. The following examples, illustrate the errors and the method of correction.

9. When we refer to incorrect amounts being entered in accounts, we often use the words 'overcast' to refer to when too much has been entered in an account, and 'undercast' when too little has been placed in an account.

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