Control Account Reconciliations
Introduction The reconciliation reconciliation is a working to ensure ensure that the entries in the sales and purchase ledgers (the memorandums, or list of individual balances) agree with the entries in the control accounts. accounts. The totals in each should be exactly the same. If not it indicates an error in either the memorandum account or the control account. All discrepanci discrepancies es should be investigated and corre corrected. cted. Preparing a control account reconciliation Preparing The format of a control control account reconciliation, reconciliation, in this case for receivables, receivables, is as follows
Illustration – Preparing a control account reconciliation Illustration Alston!s payables ledger control account is an integral part of the double entry system. Individual ledger account balances are listed and totalled on a monthly basis, and reconciled to the control account balance. Information for the month of "arch is as follows (#)Individual ledger account balances at $# "arch have been listed out and totalled %#&,'. ()The payables ledger control account balance at $# "arch is %#,*$. ($)+n further examination the following errors are discovered
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The total of discount received for the month, amounting to %#,'#, has not been entered in the control account but has been entered in the individual ledger accounts. +n listing-out, an individual credit balance of % has been incorrectly treated as a debit. A petty cash payment to a supplier amounting to %$ has been correctly treated in the control account, but no entry has been made in the supplier!s individual ledger account. The purchases day book total for "arch has been undercast (understated) by %,. /ontras (set-o0s) with the receivables ledger, amounting in total to %,1, have been correctly treated in the individual ledger accounts but no entry has been made in the control account.
Step 1 The total of discount received in the cash book should have been debited to the payables ledger control account and credited to discount received. Thus, if the posting has not been entered in either double entry account it clearly should be. As this has already been entered into the individual ledger accounts, no ad2ustment is re3uired to the list of balances. Step 2 Individual credit balances are extracted from the payables ledger. 4ere, this error a0ects the ledger accounts balance. 5o ad2ustment is re3uired to the control account, only to the list of balances. Step 3 The information clearly states that the error has been made in the individual ledger accounts. Amendments should be made to the list of balances. Again, no amendment is re3uired to the control accounts. Step 4 The total of the purchases day book is posted by debiting purchases and crediting payables ledger control account. If the total is understated, the
following bookkeeping entry must be made, posting the %, understatement 6r 7urchases /r 7ayables ledger control account As the individual ledger accounts in the payables ledger are posted individually from the purchases day book, the total of the day book being understated will not a0ect the listing of the balances in the payables ledger. Step 5 4ere it is clear that the error a0ects the control account, not the payables ledger. /orrection should be made by the bookkeeping entry 6r 7ayables ledger control account /r 8eceivables ledger control account
