Chapter 3 Flashcards
What is a control account
A general ledger account that includes totals from the book of prime entry. This ensures the posting to the general ledger are complete and accurate
What does a control account show
Summarised totals of all trans affecting their ledger… same info as receivables and payables only they show totals rather than trans
What are control accounts mainly used for
Trade receivables (credit cuts) and trade payables (credit suppliers) and VAT
How is the accuracy of the general ledger and subsidiary accounts checked?
Be reconciling the balance on the control accounts in the former to the total of the balances on the latter
Receivable ledger control: b/d explain
Normally on left side as credit customer owe business money, therefore balance b/d is an asset
Receivable ledger control: c/d explain
Balancing figure which enables the totals on both sides of the T account to equal. Usually right hand side
Receivable ledger control: credit sales explain
Increase amount owed by credit customers, therefore debit entry posted to control account reflecting increase in asset
Receivable ledger control: bank explain
When credit customer pay the amount they owe, there is a decrease in the receivable ledger control account asset. Therefore entry on ride hand side
Receivable ledger control: sales return explain
Decrease asset as they no longer owe money to business. Entry on right hand side
Receivable ledger control: discounts allowed explain
If amount owed by credit customers are partially settled through discounts allowed, the reduces rlca asset. Entry right side
Payable ledger control: b/d explain
Right hand side as business owes money and therefore the balance is a liability
Payable ledger control: c/d explain
Totals both sides of T account usually on left
Payable ledger control: credit purchases explain
Increases liability as business owes, credit side of account
Payable ledger control: banks explain
When credit suppliers r paid what’s owed, there is a decrease in pcla liability. Left side of account
Payable ledger control: purchase returns explain
Purchase returns decrease liability as the business has returned the item therefore entry on left