What is the use of control accounts?
One of the main benefits of constructing control accounts is that it can help to restrict errors. It saves time as the location of errors takes a considerable time to find the mistakes after extracting the trial balance. First, you have to learn What is the use of control accounts?
The total of all the trade receivables should equal the control account in the sales ledger, as all the data is entered into both versions simultaneously. The data consists of the amount receivable from the credit customers of the company. In addition, if it does not balance shows, an error is made in entering the transactions.
But there could be mistakes even after constructing
An entry missed out completely
An incorrect amount was recorded in both accounts.
Transactions were recorded in the wrong personal account.
The main limitation in the use of it is the inability to detect these errors.
Prevention of fraud
If one person does the double-entry bookkeeping and another oversees the control accounts, the possibility of committing fraud by employees becomes difficult.
It is because it acts as a heck and highlights the difference, for example, if the receipt is not entered in a personal account.
Incomplete records
If a business does not have a complete data set, the control accounts can help determine the missing data. I there is no data for the sales ledger, constructing the control accounts can be helpful in finding the missing data.
Advantage of using control accounts.
The principal advantage of using it is to reduce the need to deal with many sales or purchase ledger balances to single sales or purchase ledger balances. Therefore, the interim and final accounts can draw up more quickly.
Subdividing a ledger means easier to find errors because each division is self–contained in double-entry terms.