3 Control Accounts Questions

by Sameera
(Mauritius)

Q: (1) Explain the ways in which control accounts can be of use to the management of a business.

(2) outline the usefulness of control accounts.

(3) state why a sales ledger control account may have both a debit and a credit closing balance.


A: (1) Management uses control accounts to reduce input errors.

(2) Same as above. For example, the balance in the debtor control account should match the total of all individual debtor accounts in the debtors ledger. This lack of discrepancy between the two indicates that there are probably no errors in these accounts.

(3) By "sales ledger control account" I assume you mean a creditors control account. A debit and credit balance is possible if one of the guys you normally buy from and owe (a supplier - credit balance) also bought something from you and owes you (debit balance).