Control Accounts

Question 1

What does control accounts provide?

Answer 1

A method of verification which uses the total summaries of debtors and creditors balances to provide accurate, readu information when final accounts are prepared

Question 2

Why do we need control accounts?

Answer 2

Enables errors to be traced down to the ledger that does not balance. Therefore there is no need to check all of the books to find the error

Question 3

Name three ways in which control accounts can be divided

Answer 3

• Alphabetically
• Geographically
• Both

Question 4

Name & Explain the ADVANTAGES (want dis NB) of control accounts

Answer 4

• Proof of the arithmetical accuracy of the ledger entries
• Provide immediate Debtor and Creditor totals for the trial balance
• Enables the draft of final accounts to be done quickly
• Saves time in finding errors if the trial balance does not… well… balance… which means it couldn’t be called a trial balance anymore but rather a trial notbalance or something like that but I think you get the point
• Helps to reduce fraud by providing an internal check on the ledgers
• Improves management control and decisions
• Provide a check on data input in a computerised system

Question 5

What is meant by a credit balance in the debtors control?

Answer 5

This balance refers to the amount the business owes the owner

Question 6

How is a credit balance in the debtors control created?

Answer 6

• Discount given after full payment
• Debtors paid more than due amount
• Overcharging
• Buying on credit from debtors