Accounting Flow Of Purchasing And The Accounts It Hits The Purpose of Control Accounts

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The Purpose of Control Accounts

The reasons for having control accounts are as follows:

1. Check for accuracy

They check the correctness of the entries made in the individual accounts in the Sales Account and Purchase Account. It is very easy to make a mistake when posting entries, as there are hundreds of entries to be made. Figures can be transposed. Some entries may be omitted entirely, so that invoices or payment transactions do not appear as they should in the personal account. By comparison:

o Total balance on debtors account including total individual balance on individual accounts in sales ledger.

o Total balance on debtors account including total individual balance on individual accounts in purchase account.

It is possible to recognize the fact that mistakes have been made.

2. Location of Errors

It can also help in the location of errors, where postings to control accounts are made daily or weekly or even monthly. If a clerk fails to record a transaction or payment in an individual account or makes an error in a transaction, it will be a daunting task to find the error or error at the end of the year when looking at hundreds or thousands of transactions. during the year.

By using a control account, a comparison can be made with the individual balances in the sales or purchase account for each week or day of the month, and errors are detected much sooner than if the accounts did not exist.

3. For internal inspection

Where clerical accounting duties are separate, control accounts provide internal checks. The person posting the entries to the accounts will act as a check on a separate person whose job it is to post the entries to the sales and purchases ledger accounts.

4. More easy and fast

To provide balances to debtors and creditors more quickly to prepare a trial balance or balance sheet. A single balance on a controlling account is obviously easier and quicker to anticipate than multiple individual balances in a sales or purchase account.

It also means that the number of accounts in a double entry bookkeeping system can be kept to a manageable size, as individual accounts are merely memorandum accounts and control accounts instead provide the necessary accounts for a double entry system.

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