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Purchase Ledger Control Account is generally credited. It is credited if its balance increases & debited if its balance decreases. To begin with, let me first help you analyze the meaning of the term Purchase Ledger Control Account. Meaning of Purchase Ledger Control Account Purchase Ledger ContRead more
Purchase Ledger Control Account is generally credited. It is credited if its balance increases & debited if its balance decreases.
To begin with, let me first help you analyze the meaning of the term Purchase Ledger Control Account.
Meaning of Purchase Ledger Control Account
Purchase Ledger Control Account (PLCA) is a summarized ledger of all the trade creditors of the entity. This Control Account typically looks like a “T-Account” or a replica of an Individual Trade Payable (Creditor) account. But instead of containing transactions of invoices, returns, and payments related to one creditor, it contains summarized transactions of invoices, returns, and payments related to all the creditors in the business.
Purchase Ledger Control Account is also referred to as “Trade Creditors Control Account”.
The balance of the PLCA should equal the sum of balances of the individual supplier accounts. If discrepancies arise, then it should be investigated.
Is Purchase Ledger Control Account a debit or credit?
Purchase Ledger Control Account indicates the total amount a business entity owes to its suppliers at a particular point of time. Therefore, it is a “short-term liability” for the business entity and forms part of the balance sheet.
As per the Modern approach of accounting – Credit the increase in liability, Debit the decrease in liability.
PLCA is a liability, therefore it is generally credited. It will be credited if its balance increases & debited if balance decreases. Also, it will generally show a credit balance.
Example of Purchase Ledger Control Account
Suppose following were during the year transactions with the Creditors ABC Inc. & XYZ Inc. along with the outstanding balance as at 31/12/20×1.
Purchase Ledger Control Account for the year 01/01/20×1 to 31/12/20×1 will be presented as follows-
The balance of PLCA ie. 400,000 is equal to the sum of the balance of individual outstanding creditors ie. 150,000 + 250,000 = 400,000.
You can see that the transactions which increase the balance of PLCA are credited & decrease the balance are debited. Also, it is depicting a credit balance.
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