Creditors' Ledger Control Account (Purchases Ledger Control Account)

Creditors’ Ledger Control Account (Purchases Ledger Control Account)

Definition

The Creditors’ Ledger Control Account, also commonly referred to as the Purchases Ledger Control Account, is a nominal (or general) ledger control account that records the total of entries made to the individual creditors’ ledgers from the purchases journal and the cash payments journal. The total amount in the creditors’ ledger control account is periodically compared to the aggregate of individual creditors’ ledger accounts as part of an internal control system. The control account should always balance with the total of the individual creditors’ ledger amounts; any discrepancies must be thoroughly investigated.

Examples

1. Example 1: Monthly Reconciliation

   • A company purchases merchandise worth $50,000 on credit. These purchases are recorded throughout the month in the individual creditors’ ledgers.
   • At the end of the month, the total from the creditors’ ledger control account should match the aggregate of the amounts recorded in the individual creditors’ ledger accounts.

2. Example 2: Error Detection

   • If the total balance in the creditors’ ledger control account is $100,000 but the sum total of all individual creditors’ accounts is $99,500, there is a discrepancy of $500 that needs to be investigated. This can help in detecting and correcting errors promptly.

Frequently Asked Questions (FAQs)

Q1: What is the primary purpose of a Creditors’ Ledger Control Account?

A1: The primary purpose is to ensure accuracy and completeness of the recorded amounts owed to creditors, providing a check against the total of the individual creditors’ ledger accounts.

Q2: How often should the Creditors’ Ledger Control Account be reconciled?

A2: It should be reconciled periodically, often monthly, to ensure that the totals match the individual creditors’ balances and to quickly identify and correct any discrepancies.

Q3: What items are recorded in the Creditors’ Ledger Control Account?

A3: Transactions such as credit purchases, cash payments to creditors, returns, and allowances are recorded in the creditors’ ledger control account.

Q4: What causes differences between the control account and the individual creditors’ ledger accounts?

A4: Differences can be caused by errors in recording transactions, missing entries, duplications, or fraudulent activities.

Q5: Can the Creditors’ Ledger Control Account show a credit balance?

A5: Yes, it generally shows a credit balance because it represents amounts owed to creditors.

Related Terms

1. Debtors’ Ledger Control Account

   • A control account in the general ledger that summarizes the total amounts due from individual debtors.

2. General Ledger

   • The main accounting record of a company which uses double-entry bookkeeping.

3. Internal Control System

   • Processes designed to ensure the integrity of financial and accounting information.

Online References

• Investopedia – General Ledger Definition
• AccountingTools – Control Account

Suggested Books for Further Study

• “Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper

  • This book demystifies complex accounting topics and provides clear explanations ideal for both beginners and seasoned professionals.

• “Financial Accounting” by Robert Libby, Patricia A. Libby, and Daniel Short

  • A comprehensive textbook aimed at students and accounting professionals that delves into financial accounting concepts and practices.

• “Accounting Control Best Practices” by Steven M. Bragg

  • A detailed guide on various accounting control mechanisms, with practical insights for improving internal controls.

Accounting Basics: “Creditors’ Ledger Control Account” Fundamentals Quiz

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