Control accounts for receivables and payables

What a control account is for

The sales ledger holds one account per customer; the sales ledger control account holds a single summary of all of them, built from the books of prime entry. If the control account balance equals the total of the individual balances, the ledger is very probably right. If not, the error is located in one ledger rather than hunted across the whole system.

Sales ledger control account

Debit side: opening receivables, credit sales, dishonoured cheques, interest charged to customers. Credit side: cash and cheques received, discounts allowed, sales returns, irrecoverable debts written off, contra with purchase ledger. The closing balance is what customers still owe.

Purchase ledger control account

The mirror image: opening payables and credit purchases on the credit side; payments, discounts received, purchase returns and contras on the debit side.

The contra entry

When the same party is both a customer and a supplier, the smaller balance is set off: Dr Purchase ledger control / Cr Sales ledger control. It appears on both control accounts for the same amount, and forgetting one side is the most common single error in this topic.

Which errors control accounts do not catch

An invoice posted to the wrong customer, a transaction omitted from the books entirely, or a compensating error — none of these upset the agreement. A control account proves arithmetic, not truth.