CAT / FIA FFA Syllabus E. Preparing A Trial Balance - Purpose of control accounts - Notes ^{1 / 5}

A control account is a total account in the nominal ledger. Its balance represents an asset or a liability which is the grand total of many individual assets or liabilities.

The control accounts provide a convenient total which can be used immediately in extracting a trial balance or preparing accounts.

Most businesses operate control accounts for trade receivables and payables, but such accounts may be useful in other areas too, e.g. sales tax control account.

The accounts of individual trade receivables and payables are found in the Receivables Ledger (RL) and Payables Ledger (PL) respectively.

These are maintained for memorandum purposes only.

Therefore, entering a sales invoice in the account of an individual customer is not part of the double entry process.

These individual accounts are necessary for administrative convenience.

For example, a customer may wish to query the balance he owes to the business.

Reconciliation between the control account total and the receivables ledger will help to detect errors, thus providing an important control.