For credit sales, the control account is often referred to as the sales ledger or sales ledger control account (SLCA). Control accounts are most commonly used to summarize accounts payable and accounts receivable as these tend to contain a lot of transactions. Therefore they are separated into subsidiary ledgers rather than clutter up the general ledger with too much detailed information. The details of a control account will be found in a corresponding subsidiary ledger. The control account keeps the general ledger clean of details, but contains the correct balances used for preparing a company’s financial statements.

A control account will help identify what is outstanding – what is owed to the business (asset) and what the business owes (liability). Controls accounts also allow you to record both sides of an accounting transaction (the debit and the credit). They show the balance of transactions detailed in the corresponding subsidiary account. Examples of tax control accounts are shown in the related topic, Tax Types Overview.

Advantages of Control Accounts

The minor debit and credit balances brought down as indicated in the information (eg question) given should be indicated in the respective control account below the total values. The process would be completed for the accounts payable control account, which would record transactions from the purchases journal as well as the cash account. Smaller companies may be able to rely on control accounts if  they remain balanced using double-entry accounting. With accounts receivable, as invoices go out the control account is debited, which increases the balance. And as payments come in, the control account is credited, decreasing the balance. The main use of a control account is to help identify errors that appear in the subsidiary ledgers.

When we account for any entity, we are recording what has actually happened. That is what double-entry bookkeeping is – accounting for transactions that have happened within a business or company. If you’re interested in finding out more about control accounts, then get in touch with the financial experts at GoCardless. Find out how GoCardless can help you with Ad hoc payments or recurring payments.

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If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee. Control accounts could also be used for accounts payable, equipment, and inventory. For example, Jim’s hardware store invoiced two customers for a total of $700. He also received a payment in the amount of $275 from a previous invoice. The information on this site cannot be relied on as accurate and up to date.

A small organization can typically store all of its transactions in the general ledger, and so does not need a subsidiary ledger that is linked to a control account. If you need to view a specific double entry bookkeeping transaction, you would need to access the appropriate subsidiary ledger in order to view the details. Again, all of this information is automatically completed if you use accounting software.

Definition and Examples of Control Account

Examples
Jurgen operates a machine shop with some very expensive, digitally controlled boring and milling machines. He wants see the value of these important assets on his balance sheet separately from other fixed assets like workbenches and office furniture. So he creates a custom control account called Digital machinery and assigns those fixed assets to it. Northwind Traders has a variety of bank accounts it uses for different purposes. Rather than leave them all lumped together under the built-in control account, Cash at bank, it decides to break them apart for better management visibility. It creates two new custom control accounts, Payroll accounts and Term deposits.

Listing each debtor account individual account would clutter a general ledger, so those accounts could be listed in a subledger and consolidated in a control account. However, if Taylor or anyone else wants to find out the amount that a specific customer still owes for their credit purchases, or when they bought the item, that won’t be shown in the control account. Please watch the video below to gain a much better understanding of control accounts.

Terms Similar to Control Account

In this case, you need only one account that would consolidate all your VAT or GST entries. For example, for UK customers, you may want have an Output VAT account to track VAT on your sales, and an Input VAT account to track VAT that you can reclaim. 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. A different person can maintain the control account as a preventive measure against fraud. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent.