Control Accounts

Control Accounts 📊

The system of control accounts is applicable where more than one ledger is in use and the business has a lot of customers and suppliers to deal with. For each ledger in use there is a ledger clerk responsible, and his or her duty is to prepare a control account for that particular ledger. 🧾

Control accounts are a form of trial balance for each ledger in use. They provide control over the ledger by making it easier to check its arithmetical accuracy. This ensures that errors can be traced to a specific ledger and corrected quickly. 🔍

Advantages of Control Accounts ✅

Locate errors easily: Errors can be pinpointed quickly. ⚠️
Prevents fraud: Fraud becomes more difficult as transfers are monitored. 🔒
Summarizes totals quickly: Management can quickly obtain totals for debtors and creditors. 📈

Debtors' Ledger 💳

The debtors’ ledger contains the personal accounts of each firm’s debtors. If a business has many customers, the ledger can be divided alphabetically or geographically (e.g., Lusaka Debtors’ Ledger or Kitwe Debtors’ Ledger). Each debtor’s ledger will have its own control account.

Debtors Ledger Control Accounts

Also known as the Sales Ledger Control Account, this gives control over the debtors’ ledger. The following are some of the items contained in the debtors’ ledger control account:

Date	Details	Debit	Credit
Jan 1	Balances b/f	xxx	xxx
	Sales	xxx
	Cash received		xxx

Note: Cash sales and provisions for bad debts are not entered into the debtors' ledger control account. 🚫

Creditors' Ledger 💼

The creditors’ ledger contains personal accounts of a firm’s suppliers. Just like the debtors’ ledger, the creditors' ledger can be divided alphabetically or geographically (e.g., Lusaka Creditors’ Ledger or Kitwe Creditors’ Ledger). Each section of the creditors’ ledger will have its own control account.

Creditors Ledger Control Accounts

Also known as the Purchases Ledger Control Account, this gives control over the creditors’ ledger. The following are some of the items contained in the creditors’ ledger control account:

Date	Details	Debit	Credit
Jan 1	Balances b/f	xxx	xxx
	Credit purchases		xxx
	Cash paid	xxx
	Cheques paid	xxx

Reasons for Debit Balances in the Creditors' Ledger ❗

When the creditor is paid more than what was owed, and the refund is not made by the end of the period.
When payment is made in advance to a creditor and the period ends before the goods are supplied.
When a creditor is paid the full outstanding amount, and unsatisfactory goods are returned afterward.

Preparation of a Creditors' Control Account 📝

The total of the opening credit balances is credited. If there are any debit balances, they are debited. The entries that increase the amount owed to creditors are credited, and those that reduce the amount owed to creditors are debited.

Date	Details	Debit	Credit
Jan 1	Balance b/f	xxx	xxx
	Credit purchases		xxx
	Purchases returns	xxx
	Discount received	xxx
	Interest on overdue accounts	xxx

Example of a Creditors Ledger Control Account 💡

Here’s an example of a creditors’ ledger control account based on the following data:

Opening balances: 144,500 Cr.
Purchases on credit: 891,000
Discount received: 37,000
Cash payments: 520,000
Purchases returns: 33,000

Date	Details	Debit	Credit
Jan 1	Balance b/f		144,500
Jan 31	Credit purchases		891,000
Jan 31	Discount received	37,000
Jan 31	Cash payments	520,000
Jan 31	Purchases returns	33,000
Jan 31	Balance c/d		445,500

Examination Practice 📚

The following information relates to sales and debtors extracted from the books of a firm for the month of October 2012. Use this information to prepare the Sales Ledger Control Account:

Increase in provision for bad debts: 300
Set off sales ledger against purchases ledger: 80
Sales ledger credit balances at 31 Oct: 120
Total receipts from customers (including previously written-off debt): 21,450

Example of Sales Ledger Control Account 💼

Below is an example of a Sales Ledger Control Account based on the provided information:

Date	Details	Debit	Credit
May 1	Balance b/f	4,936
May 31	Sales journal	49,916
May 31	Returns inwards journal		1,139
May 31	Cheques and cash received		46,490
May 31	Discount allowed		1,455
May 31	Balance c/d		5,768

Total Debtor Account Example 💰

The following is an example of a Total Debtor Account for the financial year ending on 30 November 2011:

Date	Details	Debit	Credit
Nov 30	Sales (cash)	344,890
Nov 30	Sales (credit)	268,187
Nov 30	Total receipts from customers		600,570
Nov 30	Refund to cash customers	5,070
Nov 30	Set-offs (sales vs purchases ledger)		70
Nov 30	Bad debts written off		780
Nov 30	Provision for bad debts		90

Total Creditors Account Example 💳

This is an example of a Total Creditors Account based on the same financial year ending 30 November 2011:

Date	Details	Debit	Credit
Nov 30	Purchases (cash)	14,440
Nov 30	Purchases (credit)	496,600
Nov 30	Total payment to suppliers		503,970
Nov 30	Discount received	3,510
Nov 30	Credit notes issued to suppliers	4,140
Nov 30	Credit notes received from suppliers		1,480

Additional Practice 📝

Below are additional figures from the books of Steve for June 2011. Use these figures to prepare the Sales and Purchases Ledger Control Accounts:

Sales Ledger Control Account balance at June 1: K10,000 (Debit)
Purchases Ledger Control Account balance at June 1: K8,000 (Credit)
Purchases for the month: K12,000
Sales for the month: K16,000
Returns inwards: K1,000
Returns outwards: K400
Payments to creditors: K11,000
Receipts from debtors: K15,500
Customers' cheques returned unpaid: K500
Bad debts written off: K300
Discount received: K550
Discount allowed: K750
Transfer of debit balance from sales ledger to purchases ledger: K400
Credit balance in sales ledger at June 30: K600
Debit balance in purchases ledger at June 30: K200

Exercise: Prepare the Sales and Purchases Ledger Control Accounts 📊

Debtors and Creditors Ledger Control Account for 2012 📅

The following information is provided for preparing the debtors and creditors ledger control accounts for 2012:

Purchases ledger balances (Jan 1): K19,420
Sales ledger balances (Jan 1): K28,227
Purchases journal total: K210,416
Sales journal total: K305,824
Returns outwards journal: K1,452
Returns inwards journal: K3,618
Cheques paid to suppliers: K205,419
Petty cash paid to suppliers: K62
Cheques and cash received from customers: K287,317
Discounts allowed: K4,102
Discounts received: K1,721
Balances set off (sales ledger vs purchases ledger): K640
Balances at Dec 31: Purchases ledger total: K20,210, Sales ledger total: K38,374

Debtors Ledger Control Account 📊

Date	Details	Debit	Credit
Jan 1	Balance b/f	28,227
Throughout 2012	Sales journal	305,824
Throughout 2012	Returns inwards journal		3,618
Throughout 2012	Cash received		287,317
Throughout 2012	Discounts allowed		4,102
Dec 31	Balance c/d		38,374

Creditors Ledger Control Account 📊

Date	Details	Debit	Credit
Jan 1	Balance b/f		19,420
Throughout 2012	Purchases journal		210,416
Throughout 2012	Returns outwards journal	1,452
Throughout 2012	Payments to suppliers (cheques)	205,419
Throughout 2012	Payments to suppliers (petty cash)	62
Throughout 2012	Discounts received		1,721
Dec 31	Balance c/d		20,210

Sales and Purchases Ledger Control Account (Half Year to Dec 2011) 📅

Based on the following information, prepare the Sales Ledger Control Account and the Purchases Ledger Control Account for the half-year to December 31, 2011:

Sales ledger balances on July 1: Debit K20,040, Credit K56
Purchases ledger balances on July 1: Debit K12, Credit K14,860
Payments to trade creditors: K93,685
Cheques received from credit customers: K119,930
Purchases on credit: K95,580
Sales on credit: K124,600
Bad debts written off: K204
Discounts allowed: K3,480
Discounts received: K2,850
Returns inwards: K1,063
Returns outwards: K240
Sales ledger credit balances at Dec 31: K37
Purchases ledger debit balances at Dec 31: K26
Debit balances transferred from sales ledger to purchases ledger: K438,000

Sales Ledger Control Account (Half-Year) 📊

Date	Details	Debit	Credit
July 1	Balance b/f	20,040
Throughout half-year	Credit sales	124,600
Throughout half-year	Returns inwards		1,063
Throughout half-year	Receipts from debtors		119,930
Throughout half-year	Discounts allowed		3,480
Throughout half-year	Bad debts written off		204
Dec 31	Balance c/d		37

Purchases Ledger Control Account (Half-Year) 📊

Date	Details	Debit	Credit
July 1	Balance b/f		14,860
Throughout half-year	Credit purchases		95,580
Throughout half-year	Returns outwards	240
Throughout half-year	Payments to creditors	93,685
Throughout half-year	Discounts received		2,850
Dec 31	Balance c/d		26

Final Exercise: Prepare the Total Debtors and Total Creditors Accounts 🏦

Based on the figures provided, learners are required to prepare both the total debtors and total creditors accounts for the draft financial accounts of Better Trading Company for the financial year ending 30 November 2011.