Set Up A Double Entry Accounting System For Personal Finance The Purpose of Control Accounts

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The Purpose of Control Accounts

The reasons for having control accounts are as follows:

1. Check accuracy

They provide a check on the correctness of the entries made in the individual accounts in the sales ledger and the purchase ledger. It is very easy to make a mistake in posting entries, as there can be hundreds of entries. Figures may be transposed. Some entries can be deleted entirely, so that the invoice or payment transaction does not appear in the personal account as it should. By comparison:

o The total balance in the debtor account with the total balance in the individual accounts in the sales account.

o The total balance in the creditors’ account with the total balance in the individual accounts in the purchase account.

It is possible to identify the fact that errors have occurred.

2. Location of errors

It can also help in location of errors, where posting to control accounts is done daily or weekly or monthly. If a clerk fails to record an invoice or payment in a personal account, or makes a transaction error, it will be a huge task to find the error or errors at the end of a year, say, hundreds or thousands of transactions. during the year.

By using a control account, a comparison can be made with the individual balances in the sales or purchase account for each day of the week or month, and errors are found much faster if the accounts do not exist.

3. For internal check

While clerical accounting is separate from duties, control accounting provides internal checks. The person who posts the entries in the accounts will act as a check on another person whose job it is to post the entries in the sales and purchase accounts.

4. More simple and fast

To produce a trial balance or balance sheet to provide debtors and creditors balances more quickly. A single balance in a control account is obviously simpler and faster than multiple individual balances in a sales or purchase account.

It also means that the number of accounts in a double-entry bookkeeping system can be kept to a manageable size, as individual accounts are merely memorandum accounts and control accounts instead provide the accounts required for a double-entry system.

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