What Is a Control Account?

example of control account

Control accounting both helps produce clean financial reports, and provides checks and balances for accurate reconciliation. In the case of an accounts receivable control account, the subtotal of the customer balances in the subledger must match up to the control account. If it does not, then there is an error somewhere in the books that must be corrected. Those subledgers are totaled for each reporting period, and the totals make up the balance of the accounts receivable control account.

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A company that sells products on credit may have many transactions in the accounts receivable subledger. The details of those transactions live in the subledger and the balance is reported to the control account. The control account for accounts receivable will only show the total amount that is owed to the company at a point in time without all the details of each customer’s transaction. Smaller example of control account 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. Accounting software will automatically categorize data and create control accounts and subledgers, allowing for simple data segmenting, as well as accurate accounting practices.

What Is a Control Account?

They show the balance of transactions detailed in the corresponding subsidiary account. 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.

With the double-entry accounting system, accounts receivable, and accounts payable are the common types of control accounts. Control accounts are an important component of double-entry accounting and make up the foundation of the general ledger. They serve as a summary report of the total balances for each subledger, and allow for a streamlined analysis of a company’s balance sheet without all of the clunky details contained in each subledger.

Definition and Examples of Control Account

In other words, the accounts receivable control account reflects the total amount that a company is owed, while the its subledger shows how much each individual customer owes. While subsidiary accounts are critical for recording a company’s transactions, control accounts allow for high-level analysis by simply focusing on the balances of each account. They are especially important for reconciliation in large companies with a high volume of transactions when only the balance of the account is needed. For financial reports, the summary balances provided by the control accounts are generally all that’s needed for analysis.

  • Control accounts are an important component of double-entry accounting and make up the foundation of the general ledger.
  • Those subledgers are totaled for each reporting period, and the totals make up the balance of the accounts receivable control account.
  • While subsidiary accounts are critical for recording a company’s transactions, control accounts allow for high-level analysis by simply focusing on the balances of each account.
  • The control account for accounts receivable will only show the total amount that is owed to the company at a point in time without all the details of each customer’s transaction.
  • A company that sells products on credit may have many transactions in the accounts receivable subledger.
  • With accounts receivable, as invoices go out the control account is debited, which increases the balance.
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