Definition
The Purchases Ledger Control Account (PLCA), also known as the Creditors’ Ledger Control Account, is a key component of a company’s general ledger. This summary account consolidates the total amount owed to suppliers and other creditors for goods or services purchased on credit. It is used to streamline accounting processes and ensure efficient tracking and reconciliation of accounts payable. The balance of the PLCA reflects the total outstanding liabilities related to purchases from suppliers.
Examples
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Monthly Reconciliation:
- A company receives goods worth $10,000 on credit from various suppliers in June. Throughout June, individual supplier accounts in the purchases ledger are debited, while the PLCA in the general ledger reflects a single aggregated credit entry for $10,000.
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Tracking Outstanding Payables:
- If a business has multiple suppliers and regularly purchases goods on credit, the purchases ledger will show individual transactions with each supplier, whereas the PLCA will provide a summary total of all outstanding payables at any given point.
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Audit Trail:
- During an audit, an accountant can use the PLCA to quickly verify that the total amounts owed to creditors match the sums recorded in the individual supplier accounts within the purchases ledger.
Frequently Asked Questions
What is the main purpose of a Purchases Ledger Control Account?
The main purpose of the PLCA is to provide a summary account that reflects the total amount owed to all suppliers, simplifying the process of tracking and reconciling accounts payable within the general ledger.
How does the Purchases Ledger Control Account relate to the General Ledger?
The PLCA forms part of the general ledger and aggregates the entries from the individual supplier accounts found in the purchases ledger. This way, while individual supplier transactions are recorded in detail in the subsidiary ledger, the general ledger holds the summarized account.
What types of entries are made in the Purchases Ledger Control Account?
Entries in the PLCA typically include credit transactions for purchases made on credit from suppliers and debit transactions for payments made to suppliers.
How frequently should the Purchases Ledger Control Account be reconciled?
The PLCA should be reconciled regularly, usually at the end of each accounting period (monthly, quarterly), to ensure that the total in the control account matches the sum of the individual balances in the purchase ledger.
What are the benefits of using a Purchases Ledger Control Account?
Using a PLCA streamlines the tracking of purchases on credit and payments, simplifies the reconciliation process, and enhances the accuracy of financial reporting by reducing errors that can occur when dealing with numerous individual transactions.
Related Terms
Creditors’ Ledger Control Account
A summary account similar to the PLCA, but specifically emphasizing the role of summarizing amounts owed to creditors.
Accounts Payable
A current liability account that represents the company’s obligations to pay off short-term debts to its creditors and suppliers.
General Ledger
A comprehensive ledger that contains all the accounts of the company used to prepare financial statements.
Subsidiary Ledger
A ledger that provides detailed information about accounts that are summarized in a control account in the general ledger, such as the purchases ledger.
Online References
- Investopedia: Accounts Payable
- Accounting Coach: Control Accounts
- Corporate Finance Institute: Control Account
Suggested Books for Further Studies
- Financial Accounting by Paul D. Kimmel, Jerry J. Weygandt, and Donald E. Kieso
- Fundamentals of Financial Accounting by Fred Phillips, Robert Libby, and Patricia Libby
- Accounting Made Simple: Accounting Explained in 100 Pages or Less by Mike Piper
- Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
Accounting Basics: “Purchases Ledger Control Account” Fundamentals Quiz
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