Control Accounts and the Trial Balance
Control accounts
The sales ledger control account (SLCA) is a summary of the sales ledger; the purchase ledger control account (PLCA) summarises the purchase ledger. They are memorandum controls that help prove the subsidiary ledgers. Debit the SLCA for credit sales, opening balances and interest charges; credit it for cash received, discounts allowed, sales returns, bad debts written off, contras and the closing balance. The PLCA is mirrored: credit for credit purchases and opening balances; debit for payments, discounts received, purchase returns, contras and the closing balance. A contra is an offset between the same customer and supplier.
Trial balance
A trial balance lists ledger balances at a date and proves that total debits equal total credits. It does not prove there are no errors - errors of principle, omission, original entry, reversal and compensating errors can leave it balanced.
Traps
Cash sales do not enter the SLCA. Do not include the control account balance in the list of ledger balances as well as the individual balances. When a control account disagrees with the list of balances, investigate the list and the account systematically rather than adjusting both. Contra entries reduce both a receivable and a payable. Remember that returns inwards reduce the SLCA.
Worked example
SLCA opening debit £10,000; credit sales £50,000; receipts £42,000; discounts allowed £1,000; sales returns £2,000; bad debts £500. Closing balance = 10,000 + 50,000 − 42,000 − 1,000 − 2,000 − 500 = £14,500 debit.
Rule of thumb
Control account = opening balance ± the period's summary transactions = closing balance.