CARA'S TIPSSales and purchases ledger control accounts, contra entries, reconciliation
WAECNECO
What the syllabus asks
WAEC: (1) meaning, types and contents; (2) total debtors’ (sales ledger) and total creditors’ (purchases ledger) control accounts. Extends bk2–bk6.
NECO: (1) meaning, types and contents; (2) total debtors’ (sales ledger) and total creditors’ (purchases ledger) control accounts. Extends bk2–bk6.
What you will learn
- Explain the meaning and purposes of control accounts.
- Name the two types of control account in the WAEC syllabus.
- State the source of each figure in a control account.
- List the contents of the sales ledger control account.
- Prepare a sales ledger control account.
- List the contents of, and prepare, a purchases ledger control account.
- Treat contra entries and credit balances correctly.
- Reconcile a control account with the list of individual balances.
Key points
- A control account summarises one ledger in total.
- Sales ledger control = total debtors; purchases ledger control = total creditors.
- Balance should equal the total of the list of balances.
- Figures come from totals of the books of original entry.
- Sales control: Dr credit sales, dishonoured cheques; Cr receipts, discounts allowed, returns, bad debts, contra.
- Purchases control: Cr credit purchases; Dr payments, discounts received, returns outwards, contra.
- Cash sales, trade discount and provisions are excluded.
- Contra: Dr purchases control, Cr sales control.
- Agreement does not reveal errors of commission, original entry or omission.
- Control accounts support internal check and help find missing figures.
Start here: Meaning and purposes of control accounts
A business that sells on credit to hundreds of customers keeps a separate personal account for each customer in the sales ledger (also called the debtors’ ledger), and a separate account for each supplier in the purchases ledger (creditors’ ledger). When the trial balance does not agree, the error could be in any one of hundreds of accounts. Checking them all would take days.
A control account is a summary account that records, in total, all the entries that have been made in the individual accounts of one ledger. Its balance should equal the total of the balances on the individual accounts of that ledger. Because it holds the totals of a whole ledger, it is also called a total account: the sales ledger control account is the total debtors account, and the purchases ledger control account is the total creditors account.
Purposes of control accounts
- To check the arithmetical accuracy of a ledger. If the balance on the control account equals the total of the list of individual balances, the ledger is probably correct; if not, an error exists in that ledger.
- To locate errors quickly. When the trial balance fails to agree, the control accounts show which ledger contains the error, so the search is confined to that ledger.
- To give quick totals of debtors and creditors. The manager can find total debtors or creditors at any date without adding up every account, for example when preparing monthly accounts or applying for a bank loan.
- To prevent and detect fraud. When the control account is kept by a person other than the sales ledger clerk, a clerk who falsifies a customer’s account cannot easily hide it, because the independent total will not agree. This is part of internal check.
- To allow division of work. Different clerks can keep different ledgers (for example customers A–L and M–Z), each with its own control account, and each clerk’s work can be checked separately.
- To help prepare final accounts. In incomplete records, the control account is used to find missing figures such as credit sales or payments to suppliers.
Adamu Stores, Kano, has 340 credit customers. Its trial balance at 31 March 2026 does not agree. The sales ledger control account agrees with the list of debtors, but the purchases ledger control account does not agree with the list of creditors. Where should the accountant look first?
Solution. In the purchases ledger, and in the postings to and from it (purchases day book, returns outwards book, payments in the cash book). The agreement of the sales ledger control account suggests that the 340 customer accounts are arithmetically correct, so the search is narrowed to the creditors’ accounts.
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Practice questions
- a summary account of all entries in one ledger
- a bank statement
- a list of fixed assets
- a petty cash voucher
Show answer
A: a summary account of all entries in one ledger
Total account.
- total creditors account
- suspense account
- capital account
- total debtors account
Show answer
D: total debtors account
Total debtors.
- journal
- returns inwards book
- sales day book
- cash book
Show answer
C: sales day book
Day book total.
- bad debts
- dishonoured cheques
- discounts allowed
- returns inwards
Show answer
B: dishonoured cheques
Restores debt.
- cash sales
- credit sales
- bad debts
- discounts allowed
Show answer
A: cash sales
No debtor involved.
Key words
- Control account
- A summary account of all entries in one ledger.
- Total debtors account
- Another name for the sales ledger control account.
- Total creditors account
- Another name for the purchases ledger control account.
- Sales ledger
- Ledger of customers’ (debtors’) accounts.
- Purchases ledger
- Ledger of suppliers’ (creditors’) accounts.
- Contra entry
- Setting off a debt owed by a customer against a debt owed to the same person as supplier.
- Dishonoured cheque
- Cheque returned unpaid by the bank.
- List of balances
- Schedule of individual account balances in a ledger.
- Internal check
- Arranging duties so one person’s work checks another’s.
- Aged debtors report
- Analysis of debtors by how long amounts have been owed.
- Memorandum account
- A record kept for information, outside the double entry.
- Undercast
- Added up too low.
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