What is a Control Account? Definition Meaning Example

The details of those transactions live in the subledger and the balance is reported to the control account. The control account for accounts receivable will only show the total amount that is owed to the company at a point in time without all the details of each customer’s transaction. Control Account Definition The definition of a control account is a general ledger account that summarizes (or controls) a subsidiary ledger group of detail accounts. The benefit of not posting all of the detail entries to these accounts is that it keeps the general ledger from becoming too cluttered to manage.

However, the details involving specific customers’ accounts will be found in a subsidiary ledger. The general ledger account that sums the subsidiary accounts is said to control the balances that are reported in the ledger. This makes sense because the subsidiary accounts are not directly reported in the GL. They are summarized and posted to the control account that in turn appears in the GL.

Control Account Example

This account contains aggregated totals for transactions that are individually stored in subsidiary-level ledger accounts. The ending balance in a control account should match the ending total for the related subsidiary ledger. If the balance does not match, it is possible that a journal entry was made to the control account that was not also made in the subsidiary ledger. Those subledgers are totaled for each reporting period, and the totals make up the balance of the accounts receivable control account. In other words, the accounts receivable control account reflects the total amount that a company is owed, while the its subledger shows how much each individual customer owes.

Low dollar value control accounts or Level of Effort (LOE) accounts may be candidates for exclusion. However, if Taylor or anyone else wants to find out the amount that a specific customer still owes for their credit purchases, or when they bought the item, that won’t be shown in the control account. Instead, further information will be stored in the Accounts Receivable subsidiary ledger.

Dictionary Entries Near control account

A company can have hundreds or thousands of customers with current accounts receivable balances. The total of all of these accounts is carried forward into the A/R control account, which appears in the general ledger and the financial statements. Control accounting both helps produce clean financial reports, and provides checks and balances for accurate reconciliation. In the case of an accounts receivable control account, the subtotal of the customer balances in the subledger must match up to the control account. If it does not, then there is an error somewhere in the books that must be corrected. For example, all payables entered during one day will be aggregated from the subsidiary ledger and posted as a single summary-level number into the accounts payable control account.

Control accounts are most commonly used by large organizations, since their transaction volume is very high. A small organization can typically store all of its transactions in the general ledger, and so does not need a subsidiary ledger that is linked to a control account. The contractor can provide a matrix that lists all control accounts, names of responsible CAMs, approved budget amounts, and Budgeted Cost of Work Performed (BCWP) technique. This listing is normally called a dollarized Responsibility Assignment Matrix (RAM), and represents all performance budgets on the contract. The Control Account Manager (CAM) is the individual within the contractor’s organizational structure that has been given the authority and responsibility to manage one or more control accounts.

Types of Control Accounts

Therefore they are separated into subsidiary ledgers rather than clutter up the general ledger with too much detailed information. A control account is a general ledger account containing only summary amounts. The details for each control account will be found in a related (but separate) subsidiary ledger. For financial reports, the summary balances provided by the control accounts are generally all that’s needed for analysis.

• In the case of an accounts receivable control account, the subtotal of the customer balances in the subledger must match up to the control account.
• Low dollar value control accounts or Level of Effort (LOE) accounts may be candidates for exclusion.
• If the trial balance does not actually balance, only the accounts whose control account does not reconcile need to be checked for errors.
• The subsidiary ledger allows for tracking transactions within the control account in further detail.
• And as payments come in, the control account is credited, decreasing the balance.

In this way, the controlling account really does dictate what appears in the GL and what is reported on the financial statements. For example, “accounts receivable” is the controlling account for the accounts receivable subsidiary ledger. In this subsidiary ledger, each credit customer has their own account with its own balance. Thus, while the “accounts receivable balance” can report how much the company is owed, the accounts receivable subsidiary ledger can report how much is owed from each credit customer. While subsidiary accounts are critical for recording a company’s transactions, control accounts allow for high-level analysis by simply focusing on the balances of each account. They are especially important for reconciliation in large companies with a high volume of transactions when only the balance of the account is needed.

For example, an inventory control account will hold the balance amount between a stock account updated by stock transactions on the balance sheet and the value of stock on hand multiplied by its unit cost. Reasons for discrepancies include stock losses and gains yet to be “journaled” and the control account measures the differences and provides financial visibility and control of the value of those. If the discrepancy is significant, then actions such as stock counts can be triggered in order to validate stock and correct the balance sheet and clear the control account. With the double-entry accounting system, accounts receivable, and accounts payable are the common types of control accounts. Smaller companies may be able to rely on control accounts if  they remain balanced using double-entry accounting.

Listing each debtor account individual account would clutter a general ledger, so those accounts could be listed in a subledger and consolidated in a control account. Control accounts speed up the process of producing management accounts information as the control account balance can be used without waiting for the individual balances to be reconciled and extracted. Control Account (CA) is a management control point at which budgets (resource plans) and actual costs are accumulated and compared to earned value for management control purposes. If you’re interested in finding out more about control accounts, then get in touch with the financial experts at GoCardless. Find out how GoCardless can help you with Ad hoc payments or recurring payments. Selection of these control accounts should result in at least 80% of the Performance Measurement Baseline (PMB) value being selected for review.

The subsidiary ledger allows for tracking transactions within the control account in further detail. Individual transactions appear in both accounts, but only as an ending balance in the control account. More details such as where the money came from, who it https://kelleysbookkeeping.com/prior-year-products/ came from and the date it was paid appear in the subsidiary ledger. The ending balance in a control account should always match the ending total for its subsidiary ledger. If it doesn’t, then there could have been a mistake made during the calculations.

• Those subledgers are totaled for each reporting period, and the totals make up the balance of the accounts receivable control account.
• For financial reports, the summary balances provided by the control accounts are generally all that’s needed for analysis.
• A control account is a general ledger account containing only summary amounts.
• Individual transactions appear in both accounts, but only as an ending balance in the control account.
• The ending balance in a control account should always match the ending total for its subsidiary ledger.

A control account can keep a general ledger from becoming choked with transactional detail. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers. Control accounts could also be used for accounts payable, equipment, and inventory.

The control account keeps the general ledger free of details, but still has the correct balance for preparing the company’s financial statements. Accounting software will automatically categorize data and create control accounts and subledgers, allowing for simple data segmenting, as well as accurate accounting practices. They show the balance of transactions detailed in the corresponding subsidiary account.

• They are summarized and posted to the control account that in turn appears in the GL.
• If it doesn’t, then there could have been a mistake made during the calculations.
• Instead, further information will be stored in the Accounts Receivable subsidiary ledger.
• But they also give a business other advantages, such as permitting a single trial balance to be extracted from the general ledger.