What is the purchase ledger control account?

In addition, it provides organized and correct ending balances of specific account types for preparing financial statements. Moreover, it bring forth accuracy of analysis because it provides double-check of ending balances of each account. Most importantly, the ending balance of the subsidiary ledger should match the ending balance of the related controlling account. Also known as the “Trade debtors control A/C”, it shows the total trade debtors of a company at a given time.

Jim doesn’t need to post the details of any of the transactions since the details are already recorded in the subsidiary ledger. When using a control account for accounts receivable, a variety of subsidiary transactions will be included in the control account balance. A contra account is an account that is used in double-entry bookkeeping to offset the balance of another account. Contra accounts have opposite normal balances than the account they offset, for example if the account it offsets is a debit account, the contra account will have a credit balance.

Purchase ledger definition

Likewise, the total of the receipt of Cashbook (Cash and Bank Receipt against Credit Sales) are posted into Receivable Control Account. Further, the total of Sales Return in Sales Return Journal is Debited in Sales Return Ledger in General Ledger, and Credited in Receivable Control Account accordingly. Therefore, to ensure that all entries are posted correctly and to reduce errors in data recording, organizations deploy various control mechanisms.

If Jim had any returns or customer discounts, he would also post them in the control account to make sure that the subsidiary accounts and the control account remain in balance. If you need to view a specific 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. Control accounts are typically used in larger organizations that have hundreds or even thousands of transactions. Control accounts are part of double-entry accounting, which states that any debit posted to the general ledger will have a corresponding credit posted to the general ledger as well.

Preparing the respective sales ledger control account and purchases ledger control account

The free download invoice software for pc, or trade creditor control account, is part of the balance sheet and shows at any given time how much you owe to your suppliers. All of the individual transactions posted to your supplier ledger are included in this account, so any invoices, credit notes and payments are recorded. A control account is a general ledger account that contains the summarized amounts of transactions made within the business. Also, this account is called a controlling account since it promotes the performance of reconciliation control concerning the ending balance. Therefore, this account enables individuals to reconcile the total balance of the subsidiary ledger with the aggregate balance to be applied within the trial balance.

He also assesses whether the total amount in the control account equates with the amount in the individual supplier account to balance the transaction within the subsidiary ledger. In the general ledger, there are hundreds of thousands of accounts including expenses, income, liabilities, and asset accounts. Similarly, if every transaction will be recorded in the general ledger, it would become very difficult to organize the general ledger properly. Therefore, we need to have a separate controlling account for each account such as for accounts payable and accounts receivable.

Purpose of a control account

A control account is created as a tool for reconciling the journal entries and the general ledger. Reconciliation is an operation that ensures that entries within purchase and sales ledgers agree with the control accounts entries. Hence, this account ensures the aggregate amount is similar, and if there is no similarity, it indicates the error-promoting correction and investigation of all discrepancies. A control account is a summary-level account within the general ledger of a business that assists in streamlining detailed transactions in a balance. Also, the control account denotes the general ledger account involved in the summary of lower-level activity within a single balance. A general ledger refers to a master accounting document that provides a comprehensive record of all of the financial transactions in the business.

• Control accounts are usually maintained by large organizations because of a high volume of transactions.
• Those transactions that reduce the amount owed to suppliers are recorded on the debit side of the PLCA and those that increase the amount owed are recorded on the credit side of the PLCA.
• Purchase Ledger Control Account (PLCA) is a summarized ledger of all the trade creditors of the entity.
• As the business expands the accounting requirements increase which may lead to more errors occurring which are very difficult to find.
• The information on this site cannot be relied on as accurate and up to date.

She is a Business Content writer and Management contributor at 12Manage.com, where she contributes a business article weekly. She has over 2 years of experience in writing about accounting, finance, and business. About the Author – Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers. The following accounting information was extracted from the books of account of Coolant Ltd for the month of April 2020. From the above example, we may observe that there is duplication for posting of debit part from the Credit Sales.

What Are Control Accounts?

A control account for a Purchases Ledger can be called a Purchases Ledger Control account or a Total Creditors Account. Prepare the respective sales ledger control account and purchases ledger control account for the month of April 2020. Control accounts work as a summary account, presenting the balance of the subsidiary accounts without including the transaction details. Companies using a control account typically post balances from the subsidiary ledgers daily to make sure that they’re always in balance. It will therefore act very similarly to the trade payable account which is a liability account so will increase on the credit side.

The payments show up automatically on internal financial statements that can be generated with a click. Here is an important point to learn which most of the students are confused with. In larger organizations, the first entry from the Customer personal Ledger is not part of the Double Entry System and individual customer ledgers are kept as a memo account. However, in smaller businesses where the number of customers is low, these personal ledgers are made part of a double-entry system, whereas Receiveabel Control Accounts are kept as memorandum accounts. If there is any difference between the balance of Receoevebale Control Account and Total of all customer’s Personal Ledger, then such difference is further investigated.