What is the purpose of control accounts?

Definition of Control Account

A control account is a general ledger account containing only summary amounts. The details for each control account will be found in a related (but separate) subsidiary ledger.

The control account keeps the general ledger free of details, but still has the correct balance for preparing the company's financial statements.

Example of Control Accounts

A common example of a control account is the general ledger account entitled Accounts Receivable. When it is used as a control account, it will contain only summary amounts, such as total credit sales for a day, total collections from customers for a day, total returns and allowances for a day, and the total amount owed by all customers.

Hence, if you want to find the amount that a specific customer still owes for its purchases on credit, it will not be shown in the control account. To find the amount that a specific customer owes, its recent payments, and its recent purchases on credit, you will quickly get that information from the Accounts Receivable Subsidiary Ledger.

Control accounts could also be used for accounts payable, equipment, and inventory.

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