Control accounts are general ledger accounts that sum-ups’ a large number of businesses. As such they are part of the double-entry system. Control accounts are used to prove the correctness of the ledger bookkeeping system. They mainly use with concern to payables and receivables balances.
The prime objective of the control account is to keep the conventional ledger free of details and have the correct balance for the business statements. It can explain via an example that the financial records Receivable in the general ledger could be a control account. If its control account, the company would update the reports with a few amounts, complete collections for the day, such as total sales on account for the day, total grants and returns for the day.
The accounts particulars for each customer and each transaction would not record in the Accounts Receivable control account in the general ledger. Instead, these details of the financial records receivable activity will be in the Accounts Receivable Subsidiary Ledger. It works well because the employees functioning with the general ledger; do not need to see the details of every sale or every deal collection. However, the credit manager & sales manager will need to know detailed info of every customer, including whether a customer reduced their account balance. Any company can deliver these individuals with access to the accounts receivable subsidiary ledger & can keep the general ledger free of a remarkable amount of detail.
In control accounts, the level of activity is regularly. For example, all payables entered one day will be combined from the subsidiary ledger and posted as a single summary-level total into the accounts payable control account. Posting into all control accounts must be concluded before the books can close at the end of a reporting period; otherwise, businesses may feature in a subsidiary ledger.
If executives want to see detailed transactional info for accounts payable, they can analyse the detail located in the ledger. Large organisations most usually use control accounts since their transaction size is enormous. A small organisation can typically stock all of its transactions in the general ledger, and so does not need a subsidiary ledger that related to a control account.