Page 197 - F3 -FA Integrated Workbook STUDENT 2018-19

Control account reconciliations

Control account reconciliations

1.1 Overview

 Control accounts are nominal ledger accounts that summarise a large number
of transactions.

 As such they are part of the double-entry accounting system.

 They are used for trade receivables – trade receivables’ ledger control
account and trade payables – trade payables’ ledger control account in
place of individual accounts for each receivable and each payable within the
double-entry accounting system.

 The use of control accounts helps to reduce the volume of transactions
recorded within the nominal ledger.

 A separate record of amounts due from individual credit customers and
amounts due to individual credit suppliers is also maintained. These records are
referred to as the trade receivables’ ledger and the trade payables’ ledger
respectively. These ledgers do not form part of the double-entry accounting
system and are therefore referred to as ‘memorandum accounts’ or
‘subsidiary ledgers’.

 The balance on the trade receivables’ ledger control account (or trade payables’
ledger control account) should equal the total of the individual account balances
in the trade receivables’ ledger (or trade payables’ ledger).

 A useful check or control of the accuracy of the ledger control account is to
periodically reconcile the balance on the ledger control account with the total of
the individual balances on the receivables’ or payables’ ledger as appropriate.

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