The receivables control account
The receivables control account is an account
for recording the value of transactions in total with credit customers. The
balance on the receivables control account (debit balance) is the total amount
currently owed by all customers.
The receivables control account will contain
some or all of the totals to date for all
of the following postings to the account.
Illustration:
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| receivables control account |
There must also be individual accounts for each credit
customer in a separate receivables ledger.
Receivables control account reconciliation
Reconciliation means making sure that two
figures or totals are consistent with each other and agree with each other. The
control accounts in an accounting system can be used for control purposes, to
make sure that transactions have been recorded correctly in the accounts.
This is because if the transactions have been
recorded correctly the balance on the receivables control account in the
general ledger should equal the total of the balances on all the individual
customer accounts in the receivables ledger. A reconciliation check can be made
to make sure that these totals are the same. If they are different, the cause
of the error (or errors) should be found and corrected.
A receivables control account reconciliation
involves a comparison between the totals, looking for the reasons for any
differences between them, and correcting errors that are discovered in the
checking process.
Why might there be differences?
The balance on the receivables ledger control
account might differ from the total of all the balances on the accounts in the
receivables ledger for the following reasons:
Illustration: Possible errors
Error Correction
1 The total of the credit sales in the sales day book is
correctly debited to the receivables control account but one of the individual transactions
is not posted from the sales day book to the individual accounts in the receivables
ledger.
Adjust the individual customer’s balance
2 The total of cash received from customers, recorded in the
cash book, has been posted
correctly to the receivables ledger control account, but a
receipt from a customer is not posted from the cash book to the individual accounts
in the receivables ledger.
Adjust the individual customer’s balance
3 The sales day book may be added up incorrectly so that the wrong
amount is posted to the receivables ledger control but the individual accounts
in the receivables ledger are correctly updated.
Adjust the receivables ledger control account in the general
ledger.
4 A contra entry might be recorded in the general ledger but not
in the receivables ledger (or vice versa)
Adjust the appropriate record for the missing entry
The errors described above do not result in
differences in the total of debit and credit entries in the general ledger. Consequently, the
existence of an error will not be discovered by preparing a trial balance. However,
these errors should be discovered by a control account reconciliation.
Preparing a receivables control account reconciliation
To make a control account reconciliation, the
starting point is to compare the control account balance with the total of all
the balances on the individual customer (receivables ledger) or supplier
(payables ledger) accounts.
If the totals differ, the reasons for the
difference need to be discovered. When the reasons are discovered, the errors must
be corrected. A correction might involve:
- changing the control account balance, or
- changing one or more balances on individual customer or supplier accounts.
The two totals should be equal after all
corrections have been made. If a difference still remains between the totals,
this means that at least one error remains undetected.
The payables control account
The payables control account is an account
for recording the value of credit purchase transactions in total. The balance
on the payables control account (credit balance) is the total amount currently
owed to all suppliers.
There must also be individual accounts for
each credit suppliers in a separate payables ledger.
The payables control account is an account
for recording the value of credit transactions in total with suppliers. The
balance on the payables control account (credit balance) is the total amount
currently owed to all trade suppliers.
The payables control account will contain
some or all of the totals to date for all of the following postings to the
account.
Illustration:
 |
| payables control account |
There must be individual accounts for each supplier in a
separate payables ledger.
Payables control account reconciliation
A payables control account reconciliation
involves a comparison between the totals on the payables control account and
the list of balances in the payables ledger.
Why might there be differences?
The balance on the payables ledger control
account might differ from the total of all the balances on the accounts in the
payables ledger for the following reasons:
Illustration: Possible errors
Error Correction
1 The total of the credit purchases in the purchases day
book is correctly credited to
the payables control account but one of the individual
transactions is not posted from the purchases day book to the individual accounts
in the payables ledger.
Adjust the individual customer’s balance
2 The total of cash paid to suppliers, recorded in the cash
book, has been posted correctly to the payables ledger control account, but a payment
to a supplier is not posted from the cash book to the individual accounts in
the payables ledger.
Adjust the individual customer’s balance
3 The purchases day book may be added up incorrectly so that
the wrong amount is posted to the payables ledger control but the individual
accounts in the payables ledger are correctly updated.
Adjust the payables ledger control account in the general ledger.
4 A contra entry might be recorded in the general ledger but
not in the payables ledger (or vice versa)
Adjust the appropriate record for the missing entry
Read Also: Some other Issues of Inventory
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