What is a Control Account?
A control account is a summary account in the general ledger. It can also be referred to as an adjustment account or controlling account. The details of a control account will be found in a corresponding subsidiary ledger. The control account keeps the general ledger clean of details, but contains the correct balances used for preparing a companys financial statements. The subsidiary ledger allows for tracking transactions within the control account in further detail. Individual transactions appear in both accounts, but only as an ending balance in the control account. More details such as where the money came from, who it came from and the date it was paid appear in the subsidiary ledger. Control accounts are most commonly used to summarize accounts payable and accounts receivable as these tend to contain a lot of transactions. Therefore they are separated into subsidiary ledgers rather than clutter up the general ledger with too much detailed information. The ending balance in a control account should always match the ending total for its subsidiary ledger. If it doesnt, then there could have been a mistake made during the calculations. An Example of a Control Account  Taylor is the owner of a medium-sized IT company in San Francisco. A control account for her business is the general ledger account entitled Accounts Receivable. When used as a control account, it only contains summary amounts. Typically, this includes total credit sales for a day, total collections from customers for a day, total returns and allowances for a day, and the total amount owed by all customers. However, if Taylor or anyone else wants to find out the amount that a specific customer still owes for their credit purchases, or when they bought the item, that wont be shown in the control account. Instead, further information will be stored in the Accounts Receivable subsidiary ledger. But the two will marry up in terms of their ending balances. Control Account Advantages  The main use of a control account is to help identify errors that appear in the subsidiary ledgers. But they also give a business other advantages, such as permitting a single trial balance to be extracted from the general ledger. If the trial balance does not actually balance, only the accounts whose control account does not reconcile need to be checked for errors. A different person can maintain the control account as a preventive measure against fraud. Control accounts speed up the process of producing management accounts information as the control account balance can be used without waiting for the individual balances to be reconciled and extracted. We Can Help  If youre interested in finding out more about control accounts, then get in touch with the financial experts at GoCardless. Find out how GoCardless can help you with Ad hoc payments or recurring payments.