An account which has balance equal to the total of its underlying subsidiary ledger accounts is called a Control Account. These are accounts shown in the general ledger and they serve the purpose of checking if the total in the general ledger is equal to the total of its associated subledgers.
A control account is a summarized form of all related subledger accounts.
In below image, rectangle shows the General Ledger, the two big circles are control accounts and the smaller circles depict subledgers of control accounts sum of which is net amount of the respective control accounts.
Subledger 1 + Subledger 2 + Subledger 3 + … = Control A/C
Assuming balances S1 = 2,00,000, S2 = 3,00,000, S3 = 5,00,000
S1 + S2 + S3 = 10,00,000 (To be shown in GL)
What is the Use of a Control Account?
- It helps to check accuracy between the total of all subledger accounts and its related control account in GL.
- It helps to keep the General Ledger free from all redundant information required to prepare financial statements of a business. For example, if we talk about a sales ledger control account, a company can have hundreds and thousands of debtors, hence it will not be practical to have all of them listed in GL.