Concept of Control accounts

Introduction

Control accounts are the total accounts in the cost ledger which summarizes the totals of individual accounts (subsidiary ledger). In these accounts, entries are made once at the end of each accounting period based on the periodical totals of transactions in related subsidiary ledgers and books.

Control accounts act as a double check on the accuracy of the analysis. The balance of the control account at any time should equal to the sum of the balances of all individual accounts in subsidiary ledger.

Advantages of using control accounts

1. Provides a checking mechanism to detect errors and fraud at an early stage;
2. Removes bulky details from the general ledger;
3. Larger companies can set up accounting departments for specific areas;
4. Trial balance figures provide a summary of totals, rather than individual accounts;
5. Minimize the likelihood of fraud because different staff independently maintains control account records and subsidiary ledger.