In this way, the controlling account really does dictate what appears in the GL and what is reported on the financial statements. For example, “accounts receivable” is the controlling account for the accounts receivable subsidiary ledger. In this subsidiary ledger, each credit customer has their own account with its own balance. Thus, while the “accounts receivable balance” can report how much the company is owed, the accounts receivable subsidiary ledger can report how much is owed from each credit customer. While subsidiary accounts are critical for recording a company’s transactions, control accounts allow for high-level analysis by simply focusing on the balances of each account. They are especially important for reconciliation in large companies with a high volume of transactions when only the balance of the account is needed.

A company can have hundreds or thousands of customers with current accounts receivable balances. The total of all of these accounts is carried forward into the A/R control account, which appears in the general ledger and the financial statements. Control accounting both helps produce clean financial reports, and provides checks and balances for accurate reconciliation. In the case of an accounts https://kelleysbookkeeping.com/how-to-calculate-purchase-price-variance-ppv-and/ receivable control account, the subtotal of the customer balances in the subledger must match up to the control account. If it does not, then there is an error somewhere in the books that must be corrected. For example, all payables entered during one day will be aggregated from the subsidiary ledger and posted as a single summary-level number into the accounts payable control account.

Example of Control Accounts

Therefore they are separated into subsidiary ledgers rather than clutter up the general ledger with too much detailed information. A control account is a general ledger account containing only summary amounts. The details for each control account will be found in a related (but separate) subsidiary ledger. For financial reports, the summary balances provided by the control accounts are generally all that’s needed for analysis.

A control account can keep a general ledger from becoming choked with transactional detail. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers. Control accounts could also be used for accounts payable, equipment, and inventory.

Terms Similar to Control Account

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 Control Account Definition came from and the date it was paid appear in the subsidiary ledger. The ending balance in a control account should always match the ending total for its subsidiary ledger. If it doesn’t, then there could have been a mistake made during the calculations.