benefits and limitations control accounts

Question 1

arithmetical error benefit

Answer 1

They show if an arithmetical error has taken place if the balance on the control account does not equal the total of the individual accounts in the receivables ledger or payables ledger. If they don’t agree, then an error has definitely taken place. This helps to avoid incorrect balances in the receivables ledger and in the payables ledger.

Question 2

total figure benefit

Answer 2

They immediately provide total figures for trade receivables and trade payables, instead of having to add up the individual accounts in the receivables ledger and payables ledger. This helps to produce the financial statements.

Question 3

fraud benefit

Answer 3

They help to prevent fraud. This is because the managers have access to control accounts, which restriets the possibility of fraudulent entries by other employees.

Question 4

arithmetical limitation

Answer 4

The control accounts verify the arithmetical accuracy of the ledger, but they do not prove that each individual account balance is correct.

Question 5

error of omission limitation

Answer 5

They won’t show if a transaction has been completely left out of the accounting system (error of omission).

Question 6

error of original entry limitation

Answer 6

They won’t show if the wrong amount was entered in the accounting system for a transaction (error of original entry.

Question 7

error of comission limitation

Answer 7

They won’t show if a transaction was entered in the wrong account in the receivables ledger or payables ledger (error of commission).

Question 8

where its occured limitation

Answer 8

Although they may show that an error has occurred, they do not show exactly where in the receivables or payables ledger the error has taken place.