topic seven n.
Skip this Video
Loading SlideShow in 5 Seconds..
Topic Seven PowerPoint Presentation
Download Presentation
Topic Seven

Loading in 2 Seconds...

play fullscreen
1 / 20

Topic Seven - PowerPoint PPT Presentation

  • Uploaded on

Topic Seven. Control Accounts. Learning outcomes. After the end of this lesson, you should be in a position to, Describe control accounts Explain the importance of control accounts Draw sales control account Draw purchases control account

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Topic Seven' - pakuna

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
topic seven

Topic Seven

Control Accounts

learning outcomes
Learning outcomes
  • After the end of this lesson, you should be in a position to,
    • Describe control accounts
    • Explain the importance of control accounts Draw sales control account
    • Draw purchases control account
    • Identify causes of differences between control accounts and subsidiary ledgers
difference between errors and fraud
Difference between errors and fraud
  • Topic 6 lessons
    • Accountants might make a number of errors in preparing financial statements
    • Difference between errors and fraud is just that whereas errors are unintentional, fraud is deliberate
    • Trial balance will not reveal all errors
    • An environment where errors are not easily identified is likely to have high instances of fraud
    • Control accounts are useful in detecting errors
importance of control accounts
Importance of control accounts
  • Help to identify errors either in subsidiary accounts or the control account
  • Due to segregation of duties between those handling control accounts and subsidiary ledgers, errors and irregularities might be identified
  • Reduces workload in preparing final accounts and hence preventing errors at year end.
importance of control accounts1
Importance of control accounts
  • Identification of errors not revealed by the trial balance
  • Provides a check that sales and purchases are properly posted
types of control accounts
Types of control accounts
  • Two categories
    • Sales control ledger
    • Purchases control ledger
sales control ledger
Sales control ledger
  • A summary of all;
    • credit sales,
    • sales receipts,
    • sales returns
    • discount allowed
    • Interest surcharged to customers
    • Any other transaction that affects customer accounts

See the next slide for an illustration of a sales control ledger

sales control ledger1
Sales control ledger
  • Totals of all individual customer account balances should agree with the sales control ledger
  • Differences should be reconciled on a regular basis
  • In the next slide we summarize some of the causes of differences
causes of errors in sales control ledger
Causes of errors in sales control ledger
  • Completeness of the debtors listing. Some debtors could have been inadvertently omitted.
  • Some invoices might not have been posted in the control account.
  • Some credit might have been omitted in the control account.
  • Interest surcharges might not have been adjusted for in the respective customer’s accounts.
causes of errors in sales control ledger1
Causes of errors in sales control ledger
  • Receipts for items other than sales, for example proceeds on sale of equipments, could have been posted in the sales control.
  • Summation of subsidiary account balances might be inaccurate.
  • Clerical errors might have been made in balancing subsidiary accounts.
  • Duplicate invoices and receipts could have been made in the subsidiary accounts.
sales control account1
Sales control account
  • A careful review of the above will help one appreciate the vast benefits derived from a sales control account
  • To be useful;
    • Preparers should have no input on the books of original entry
    • Reconciliations should be done regularly
purchases control ledger
Purchases control ledger
  • Is a control account for purchases
  • Will contained transaction totals of accounts payables such as;
    • Purchase returns
    • Credit purchases
    • Payments to credit suppliers
    • Discount received
    • Any other transaction with accounts payable
  • Totals in this account should equal the sum totals of subsidiary accounts
purchases control account
Purchases control account
  • Differences between the control account and the subsidiary ledgers could be caused by;
    • Omission of credit notes in the control account or subsidiary ledgers
    • Misposting of payments
    • Misposting of purchase returns
purchases control account1
Purchases control account
  • Misposting of invoices from suppliers
  • Clerical errors in recording transactions in the subsidiary accounts
  • Computational errors in determining totals in the subsidiary accounts or the control account.
tips for purchase control ledger
Tips for purchase control ledger
  • Segregation of duties

- Accountants in charge of the control account should not have an input in the purchase day books, purchase returns and other books of original entries relating to purchases

- Reconciliations between the control account and subsidiary accounts should be done on a regular basis

maintenance of control accounts
Maintenance of control accounts
  • Sales and purchases control account could be part of the accounting system

- Balances in these accounts are transferred to the trial balance

  • Controlaccounts could be maintained outside the general ledger as memorandum accounts

- Balances in the control accounts are used to provide a control check over the subsidiary account. In this case balances in the subsidiary accounts are transferred to the genera ledger

  • Quality of information provided by control accounts depends on;
      • Frequency of the reconciliations
      • Segregation of duties
      • Review of reconciliations by a responsible company official

Having well maintained control accounts will help not only to identify errors, but also deter frauds.