BRITS ONLINE SCHOLASTICUS SCHOOLS (BOSS): LECTURE NOTE ON ACC 121-PRINCIPLES OF ACCOUNTING 2

CONTROL ACCOUNTS

On completion of this module the students should be able to:

i. Understand what control accounts are?

ii. Understand the uses/needs for control accounts.

iii. Understand the classification of control accounts.

iv. Understand the distinction between sales ledger control accounts and purchases ledger control accounts.

v. Understand the items to be found in both total debtors (receivable) control accounts and total creditors (payable) control accounts.

vi. Understand the accounting treatments of those items found in both total debtors control accounts and total creditors control accounts.

vii. Understand self-balancing ledger

viii. Understand the illustrations on control accounts.

ix. Understand the review questions

INTRODUCTION

In a business organisation, many customers are involved in business transactions. The transactions involved are recorded within the principles of double entry system. It occasionally happens that trial balance fails to agree and the errors may not be easily located. It is presumed that the errors might originate from entries, postings, additions and deductions. It is good to design a system to be incorporated in the books to serve as a means of control that will reduce the time to find the errors.

In order to achieve this objective, control accounts are prepared for the purpose of internal check. The control accounts are maintained to check the accuracy of the list of debtors and creditors at the end of each month. They include the debtors and creditors balances in the personal accounts when separate ledgers are maintained.

A control accounts is a total account inserted in a ledger or section of accounts to make it self-balancing. A control accounts is self-balancing because all the transaction entries, the opening and closing balances required are available. It is therefore normally expected that the two sides of the account should be equal to each other.

The principle states that once the total opening balance of a complete ledger is known with the additions and deductions during the period, the closing balance will simply emerge out.

USES OF CONTROL ACCOUNTS

The following are the reasons or uses or advantages of control accounts which are not limited to these:

i. Location of errors: Control accounts aid the location of errors.

ii. Prevention of fraud: Through control account, fraud cannot be easily perpetrated.

iii. Aid management control: Management control is aided as a result of the speed at which information is obtained.

iv. Internal check on ledgers clerk: Control account operates as internal check on ledger clerk.

v. Easy detection of missing figure: Missing figures can be easily detected.

FORMAT OF CONTROL ACCOUNTS

The following are the format of control accounts:

(A) FORMAT OF PURCHASES LEDGER CONTROL ACCOUNTS

The format of purchases ledger control accounts are elucidated below:

AJIMATANRAEJE ENTERPRISES
PURCHASES LEDGER CONTROL ACCOUNTS
FOR THE MONTH OF DECEMBER 2021
	DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
			N			N
	1/1/2021	Balance B/f	xxxp	1/1/2021	Balance B/f	xxxq
		Cheque to creditors	xxx		Purchases	xxx
		Cash to suppliers			Cash refund	xxx
		Discounts received	xxx		Discount withdrawn	xxx
		Bills payable	xxx		Carriage Inwards	xxx
		Credit note received	xxx		Debit note received	xxx
		Returns Outwards	xxx
		Contral Entry/ Set-Off	xxx
	31/12/2021	Balance C/f	xxxm	31/12/2021	Balance C/f	xxxn
			xxxxz			xxxxz
	1/1/2022	Balance B/f	xxxn	1/1/2022	Balance B/f	xxxm

(B) FORMAT OF SALES LEDGER CONTROL ACCOUNTS

The format of sales ledger control accounts are elucidated below:

AJIMATANRAEJE ENTERPRISES
SALES LEDGER CONTROL ACCOUNTS
FOR THE MONTH OF DECEMBER 2021
	DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
			N			N
	1/1/2021	Balance B/f	xxxa	1/1/2021	Balance B/f	xxxb
		Sales	xxx		Cash received from debtors	xxx
		Dishonoured Cheques/ bills	xxx		Cheque from customers	xxx
		interest charges	xxx		Allowance	xxx
		Carriage Outwards	xxx		Bad debts	xxx
		Discounts disallowed	xxx		credit note issued	xxx
		Debit note issued	xxx		Discount Allowed	xxx
		Payment to debtors for claims (Refund)	xxx		Returns Inwards	xxx
		Service charges	xxx		Bills Receivable	xxx
	31/12/2021	Balance C/f	xxxp		Set-Off/ Contra Entry	xxx
				31/12/2021	Balance C/f	xxxq
			xxxxw			xxxxw
	1/1/2022	Balance B/f	xxxq	1/1/2022	Balance B/f	xxxp

ILLUSTRATIONION 1

The following balances were extracted from the books of Aiyegbaogbon Enterprises on

31st December, 2020.

Sales ledger, debit balance 1/1/20220 98,260

Sales ledger, credit balance 1/1/2020 2,370

Bought ledger, credit balance 1/1/2020 72,190

Bought ledger, debit balance 1/1/2020 4,210

Cash purchases 27,380

Cash sales 19,360

Accounts settled by contra 6,220

Bills dishonoured 7,500

Bills debts written off 5,260

Bills of exchange drawn on customers 34,730

Returns Inward 7,450

Returns Outwards 8,920

Cash received from debtors 689,230

Cash paid to suppliers 495,140

Discount Received 19,320

Discount Allowed 24,750

Cash refunded to customers 1,270

Sales ledger, debit balance 31/12/2020 120,570

Sales ledger, credit balance 31/12/2020 2,010

Bought ledger, debit balance 31/12/2020 3,340

Bought ledger, credit balance 31/12/2020 55,340

You are required to prepare:

(a) Sales Ledger Control Account

(b) Purchases Ledger Control Account

SOLUTIONS

(a)

AIYEGBAOGBON ENTERPRISES
SALES LEDGER CONTROL ACCOUNTS
FOR THE MONTH OF DECEMBER 2020

DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
		N			N
1/1/2020	Balance B/f	98,260	1/1/2020	Balance B/f	2,370
	Sales	781,540		Cash received from debtors	689,230
	Dishonoured bills	7,500		Bills debts written off	5,260
	Cash refund to customers	1,270		Discount Allowed	24,750
				Returns Inwards	7,450
				Bills of Exchange drawn on customer	34,730
				Set-Off/ Contra Entry	6,220
31/12/2020	Balance C/f	2,010	31/12/2020	Balance C/f	120,570
		890,580			890,580
1/1/2021	Balance B/f	120,570	1/1/2021	Balance B/f	2,010

(b)

AIYEGBAOGBON ENTERPRISES
PURCHASES LEDGER CONTROL ACCOUNTS
FOR THE MONTH OF DECEMBER 2020

DATE	PARTICULAR	AMOUNT	DATE	PARTICULAR	AMOUNT
		N			N
1/1/2020	Balance B/f	4,210	1/1/2020	Balance B/f	72,190
	Set-Off / Contral Entry	6,220		Purchases	513,620
	Returns Outwards	8,920
	Cash paid to suppliers	495,140
	Discount Received	19,320


31/12/2020	Balance C/f	55,340	31/12/2020	Balance C/f	3,340
		589,150			589,150
1/1/2021	Balance B/f	3,340	1/1/2021	Balance B/f	55,340

ASSIGNMENTS

1. The following balances have been extracted from the books of Ajimatanraeje Nigeria Limited

January 1, 2021 Sales Ledger Balance 12,000

January 1, 2021Purchases Ledger Balance 20,000

Total for the month of January 2021:

Purchases Journal 200,000

Sales Journal 500,000

Cheque and cash from customers 290,000

Cheques paid to suppliers 150,000

Returns Outwards Journal 3,000

Returns Inwards Journal 5,000

Discounts Allowed 7,744

Discount Received 200

Bad Debt written off 150

Debit note received 6,485

Debit note issued 936

Customers cheques dishonoured 60

Carriage Inwards 485

Carriage Outwards 372

Balance on sales ledger set-off against balance in purchase ledger 1,000

Petty cash to suppliers 2,000

Bills receivable 160

Bills payable 315

Discounts allowed now disallowed 30

Services charges added to unpaid accounts 1,040

Credit notes issued to customers 4,930

Balance as at 31st January, 2021 is given as following:

Dr Cr

N N

Bought ledger 3,000 66,485

Sales Ledger 255,454 50,000

You are required to prepare:

(a) Total debtors Control Accounts

(b) Total Creditors Control Accounts

2. From the following details, prepare sales and purchases ledger control account of Ifelodun Nigeria limited.

Creditors balance CR 01/01/20 8,300

Debtors balance DR 01/01/20 7,000

Sales 52,570

Debtors balance CR 01/01/20 200

Dishonoured cheque 1,000

Cash received 48,750

Discount allowed 1,250

Creditors balance DR 01/01/20 70

Purchases 31,180

Provision for doubtful debts 01/01/20 2,500

Cash paid to creditors 29,290

Discount received 30

Returns Outwards 60

Bills payable 530

Returns Inwards 800

Bills receivable 3,500

Bad debts written off 300

Cash paid to clear customers credit balance 11

Set off between sales /purchases ledger 180

Bad debts previously written off recovered 121

Closing balances at 31st December, 2020:

Debtors Dr balance 5,820

Debtors Cr balance 120

Creditors Dr balance 80

Creditors Cr balance 9,400

3. The following information is available about the transactions made by a supplier with his three creditors during January 2021:

Creditors	Banuso	Sogbae	Ajigbare
	N	N	N
Cr. Balance B/f	6,360	6,300	3,750
Credit Purchases	17,040	16,500	10,500
Purchases Returns	540	840	450
Bills Payable	1,680	1,830	1,200
Debit Note Received	1,350	1,050	690
Carriage Inwards	960	660	900
Cash Payable	10,500	4,500	7,050
Credit Note received	1,680	1,380	1,800
Discount Received	690	1,590	1,350
Discount Received Withdrew	420	1,020	270
Cheque to creditors	600	960	1,050
Cr. Balance C/f	10,440	14,430	3,210