How do the sales and purchases ledger control accounts check the personal accounts, and what makes them balance?
Prepare sales ledger and purchases ledger control accounts and explain their purpose
A focused answer to the O-Level Principles of Accounts outcome on control accounts. The sales and purchases ledger control accounts, the entries on each side, and how they check the total of the personal accounts.
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What this dot point is asking
SEAB wants you to prepare the sales ledger and purchases ledger control accounts and explain their purpose. The central insight is that a control account is a total account: it summarises, in one place, all the transactions affecting a whole ledger of personal accounts, so its balance can be compared with the sum of the individual balances as a check.
The answer
What a control account is
A control account records, in total, the transactions affecting a group of personal accounts:
- The sales ledger control account (debtors control) summarises all the customers' accounts.
- The purchases ledger control account (creditors control) summarises all the suppliers' accounts.
Its figures come from the totals of the books of prime entry (total credit sales, total receipts, total returns), not from individual entries.
The sales ledger control account
It behaves like one big receivable account:
| Debit (increases receivables) | Credit (decreases receivables) |
|---|---|
| Opening balance of receivables | Receipts from customers |
| Credit sales | Sales returns (returns inwards) |
| Dishonoured cheques | Discount allowed |
| Irrecoverable debts written off | |
| Closing balance c/d |
The purchases ledger control account
It behaves like one big payable account:
| Debit (decreases payables) | Credit (increases payables) |
|---|---|
| Payments to suppliers | Opening balance of payables |
| Purchases returns (returns outwards) | Credit purchases |
| Discount received | |
| Closing balance c/d |
The purpose: a check
The closing balance of the control account should equal the total of all the individual balances in that ledger. If they agree, the personal accounts are probably correct; if they differ, there is an error to investigate. Control accounts also give a quick total of receivables or payables, help locate errors, and deter fraud because a clerk's individual entries are checked against an independently totalled figure.
Examples in context
Example 1. A quick total for the statements. Rather than add up hundreds of customer balances by hand, the bookkeeper reads the sales ledger control account balance as the figure for trade receivables. Because the control account is independently totalled from the books of prime entry, it gives a fast, checkable figure for the statement of financial position.
Example 2. Catching a clerk's slip. The sales ledger control account shows \20,000\. The \300$ difference prompts a check, revealing a customer receipt posted twice. Like a bank reconciliation, the control account surfaced an error that the personal accounts alone would have hidden.
Try this
Q1. State which control account each belongs in: discount allowed, credit purchases, receipts from customers. [3 marks]
- Cue. Discount allowed - sales ledger control; credit purchases - purchases ledger control; receipts from customers - sales ledger control.
Q2. Opening receivables \10,000\, receipts \22,000\. State the closing receivables. [2 marks]
- Cue. Closing receivables = 10\,000 + 25\,000 - 22\,000 - 1\,000 = \12,000$.
Q3. Explain what it means if the control account balance does not equal the total of the personal accounts. [2 marks]
- Cue. There is an error somewhere in the ledger or its totals, which must be investigated and corrected so the two agree.
Exam-style practice questions
Practice questions written in the style of SEAB exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Original8 marksPrepare the sales ledger control account for June from the following: opening balance of receivables \15\,000\; receipts from customers \38\,000\; discount allowed \500\. Find the closing balance.Show worked answer →
| Sales ledger control account | $\
| --- | --- | --- | --- |
| Balance b/d | 15,000 | Bank (receipts) | 38,000 |
| Credit sales | 40,000 | Sales returns | 1,500 |
| | | Discount allowed | 500 |
| | | Irrecoverable debts | 300 |
| | | Balance c/d | 14,700 |
| | 55,000 | | 55,000 |
| Balance b/d | 14,700 | | |
Closing receivables = 15\,000 + 40\,000 - 38\,000 - 1\,500 - 500 - 300 = \14,700$.
Markers reward debiting the opening balance and credit sales, crediting receipts, returns, discount allowed and the write-off, and the closing balance of \14,700$.
Original5 marksExplain the purpose of a control account, and how it is used to check the personal accounts in the ledger.Show worked answer →
A control account is a summary account that records, in total, all the transactions affecting a group of personal accounts (the sales ledger control account for customers, the purchases ledger control account for suppliers). Its entries come from the totals of the books of prime entry (total credit sales, total receipts, and so on).
Its purpose is to check the personal accounts: the closing balance of the control account should equal the total of all the individual balances in that ledger. If they agree, the personal accounts are probably correct; if they differ, there is an error to find. It also gives a quick total of receivables or payables and helps locate errors and deter fraud.
Markers reward defining the control account as a total summary fed from the books of prime entry, and explaining that its balance should equal the sum of the individual personal account balances.
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