What is the Purpose of Control Accounts-00039

A business needs to have accounts created for individual creditors and debtors in its general ledger. Creditors are people/entity to whom company owes money and debtors are entities/people who owe money to the business. But when a business grows then the number of creditors and debtors also grows. We know that trial balance can give us the mathematical accuracy of accounts and if there is any difference in trial balance we can know it from the general ledger by actually checking each and every transaction for the year. But it is a very time consuming job to check each and every transaction if the business of the company is huge because it will have many many transaction to check. So in this control accounts are maintained in general one for total creditors and one for total debtors. Debtor's account is called debtor's control account and creditor's account is called creditor's control account. These accounts will not get hit by individual purchase, purchase returns, payments to creditor in case of creditor's control account and by sales, sales return, receipts in case of debtor's control account. Periodically this summarized data will be posted from individual ledgers which will be created for each type of transaction e.g a sales subsidiary ledger, purchase subsidiary ledger etc which will contain actual details of transactions with invoice number and periodically the amounts will be summarized from these subsidiary ledgers and posted to the control accounts at a single time. This way the transactions in general ledger will decrease and will become easy to manage and can be easily checked against creditor's or debtor's details in total creditor's ledger and total debtor's ledger for accuracy.

Date	Detail	Debit	Credit	Balance
01/01/08	CAPITAL A/C	50000	0	50000 DR
02/01/08	FURNITURE A/C	0	10000	40000 DR
03/01/08	PURCHASES A/C	0	30000	10000 DR
05/01/08	SALES A/C	40000 0	50000	DR
06/01/08	SALARIES A/C	0	5000	45000 DR
TOTAL		90000	45000	45000	DR