What are Control Accounts?

Not all the transactions done in a business are in cash. Now days, businesses do a lot more transactions in credit and thus there is a long list of debtors and creditors. Since the bulk of entries are made in the accounts of debtors and creditors, these two classes of accounts are taken out of the General Ledger and put in a subsidiary ledger.

Subsidiary ledgers include

Sales Ledger: Which contains all debtors accounts

Purchases Ledger: contains all creditors’ accounts.

This is where control account comes in…

Control account is a summary of all the accounts in the subsidiary ledgers.

The summary of all accounts in the Sales ledger make up the Debtors control account and the summary of all accounts in the Purchase Ledger is known as the Creditors control account.

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