Ms Snow Assesed Task Pt 2

Question 1

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 or payables ledger. If they don’t agree, then an error has definitely taken place. This helps avoid incorrect balances in the receivables ledger and the payables ledger

Question 2

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

Benefit

Answer 3

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

Question 4

Limitations

Answer 4

The control accounts verify the arithmetical accuracy of the ledger, but they do not prove that each individual account balance is correct.
➢ They won’t show if a transaction has been completely left out of the accounting system (error of omission).
➢ They won’t show if the wrong amount was entered in the accounting system for a transaction (error of original entry).
➢ They won’t show if a transaction was entered in the wrong person’s account in the sales or purchases ledger (error of commission)

Question 5

Limitation

Answer 5

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