Control account (Also known as a controlling account or adjustment account) is a ledger account that consists of the balance of the accounts or subsidiary accounts. The business transactions’ details are usually recorded in different subsidiary ledgers and then summed up and balanced into the matching control account.
Control accounts enable high-level analysis concentrating on every account’s balance, while subsidiary accounts are very important for recording a business’s transactions. They are vital for reconciliation in a big organization with a high quantity of trades when the account (Also see Practices and Advantages for Modifying Chart of Accounts) balance is required. However, if accounting (Also see An Overview of Accounting Procedures) is not your thing, you should get assistance from the accounting firm Malaysia.
A business that sells goods on credit might have many trades in the trade receivable sub-ledger. The transaction’s details should be recorded in the sub-ledger, and the balance should be recorded in the control account. The trade receivable control account will only reflect the total amount that is owed to the business at the time.
Example of the common control accounts:
How do a Control Accounts Works?
- Inventory
- Equipment
- Trade Payable
- Trade Receivable
A control account is a vital part of double-entry accounting and composes the structure of the ledger. They enable a streamlined analysis of a business’s balance sheet and summarize the total balances for every sub-ledger.
Based on the size of a business or company, a ledger can in some cases have numerous control accounts, like trade receivable. When it comes to a business’s trade receivable, every transaction’s details, including the consumer information, the sale details, payment terms and refunds will be recorded and managed by the trade receivable sub-ledgers. If a smaller business remains balanced using double-entry accounting, it might have the ability to count on control accounts. Basically, the trade receivable control account shows the business’s total amount, while its sub-ledger reflects how much every consumer owes.
Control accounting (Also see Do You Know What Are Accounting Controls?) not only provides checks and balances for reconciliation and also helps create a tidy financial report. When it comes to the trade receivable control account, the total of the consumer balances in the sub-ledger has to match up to the control account. However, there might be a mistake somewhere if it does not.
Nevertheless, extra control accounts might be helpful regarding the business’s size, the products sold, and the sector. Considering that control accounts compose the ledger, it’s vital to make sure a control account is related to every field of your company.