Using Control Accounts

Question 1

What are control accounts?

Answer 1

Control accounts are Master accounts which control a number of subsidiary accounts

Question 2

What are three commonly used control accounts?

Answer 2

• Sales ledger control accounts
• purchase ledger control accounts
• value added tax control account

Question 3

True or false transactions are recorded on the same side of the control account as on the subsidiary accounts

Answer 3

True

Question 4

What is set-off or contra entries?

Answer 4

Set-off/contra entries occur when the same person or business has a subsidiary account in both the sales ledger and purchase ledger and it is agreed to off-set one balance against the other to leave a net balance

Question 5

What do the majority of accounting systems look like?

Answer 5

In most accounting systems; control accounts are incorporated into the general ledger of that double entry bookkeeping system. The subsidiary accounts are in a separate ledger- sales ledger and purchase ledger

Question 6

How are controlled accounts reconciled?

Answer 6

At regular intervals

• sales ledger control account to the total of the balances of the subsidiary accounts in the sale ledger
• purchase ledger control account to the total of the balances of the subsidiary accounts in the purchase ledger
• VAT control account to the amount due to or from the HMRC

Question 7

How do you control accounts aid management?

Answer 7

They give instant information on the total of trade receivables/trade payables/VAT

By making fraud more difficult

In helping to locate errors [but not all errors will be shown]

Question 8

Define control account

Answer 8

A master account which controls a number of subsidiary accounts

Question 9

Define sales ledger control account

Answer 9

The general ledger account which controls the sales ledger

Question 10

Define purchases ledger control account

Answer 10

The general ledger account which controls the purchase ledger

Question 11

Define value added tax control account?

Answer 11

The general ledger account which brings together totals of VAT from the books of prime entry

Question 12

Define set-off/contra entries

Answer 12

Where balances in the sales ledger and the purchase ledger are set-off against one another

Question 13

Define aged trade receivable analysis

Answer 13

A summary of each customer balance analysed into columns showing how long the amounts have been outstanding