Control accounts are used in accounting to summarize the balances of a group of individual accounts, typically those with a large number of transactions. They are used to keep the general ledger free of clutter and make it easier to prepare financial statements.
Here are the main purposes of having control accounts:
- To summarize the balances of a group of individual accounts: Control accounts provide a quick and easy way to see the total balance of a group of accounts, such as accounts receivable or accounts payable. This can be helpful for financial statement preparation and analysis.
Control accounts in accounting
- To reduce the number of entries in the general ledger: By using control accounts, you can avoid having to record each individual transaction in the general ledger. This can save time and space.
- To provide a level of control over the subsidiary accounts: Control accounts can help to ensure that the total of the subsidiary accounts agrees with the balance of the control account. This can help to prevent errors and fraud.
Here are some of the most common types of control accounts:
- Accounts receivable control account: This account summarizes the balances of all of a company’s customers’ accounts.
- Accounts payable control account: This account summarizes the balances of all of a company’s suppliers’ accounts.
- Inventory control account: This account summarizes the balances of all of a company’s inventory accounts.
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