Control account

Control account
See also
Comparative statements Sub ledger Positive pay Month end closing Nominal ledger Deposits in transit Subsidiary account Segment margin Accounting process

Control Account (or master account) – an account placed in the general ledger. On this account is recorded sum of the account balances from the particular subsidiary ledger. Therefore, all of the summarized accounts from subsidiary ledger are then shown in one control account in the general ledger. Because of creating control accounts, the general ledger is transforming. There are no more individual detailed accounts from the subsidiary ledger, as they are erased and changed to control accounts. For example, subsidiary ledger named Accounts Receivable (all the accounts from debtors who owe to a company), as control account is known as the Accounts Receivable control account. However, all the specified data can still be found in particular account in the subsidiary ledger.

Advantages of creating control accounts

There are some essential advantages of making control accounts:

1. Control accounts are created to reduce the amount of information through summarizing all the balances from subsidiary ledgers.
2. Because of control accounts, the general ledger is more clear and visible for management. It is less complicated for executives to control and make decisions.
3. Control accounts are improving internal control.
4. Control accounts are accelerating creating profit and loss account at the end of a particular period, as you save time for summarizing balances in the subsidiary ledger.
5. Through control accounts, the general ledger is kept under executive control.
6. Financial condition and detailed accounts of the company can stay unrevealed.

Keeping control accounts

For some keeping, control account can be confusing because the amount which is posted on the one side of the control account as summarized balances also need to be posted as the individual amounts to the same side of the secondary ledger. Therefore, it can be 5 or even 500 entries from subsidiary ledger summarized and posted to the control account. Posting to the control account is not from individual accounts wherefore, the double-entry principle is not used here.

References

• A Minbiole E. (2007) CliffsQuickReview Accounting Principles, Houghton Mifflin Harcourt
• Bhar K. B. (2008) Cost Accounting, Academic Publishers
• Chambers L., Ziesenheim K., Trevisani P. (2003) J.K. Lasser Pro Separate Account Management: An Investment Management Strategy Designed for High Net Worth Individuals, John Wiley & Sons
• FIA Maintaining Financial Records FA2 (2017), BPP Learning Media
• Marley S., Pedersen J. (2015) Accounting for Business: An Introduction , Pearson Higher Education AU, 2
• Masoom K. (2013) The Entrepreneur's Dictionary of Business and Financial Terms, PartridgeIndia
• Sangster A., Wood F. (2018) Frank Wood's Business Accounting, Tom 1, Pearson UK, 14

Footnotes

Author: Anna Woroń