What is the controlling account for the subsidiary ledger for vendors?

Control accounts are summary accounts in the general ledger. They show the balance of transactions detailed in the corresponding subsidiary account. 

Definition and Examples of Control Account

A control account is a general ledger account that only contains the balance of the associated subsidiary account or accounts. The details of a company’s transactions are recorded in various subsidiary ledgers and then balanced and summarized into the corresponding control account.

While subsidiary accounts are critical for recording a company’s transactions, control accounts allow for high-level analysis by simply focusing on the balances of each account. They are especially important for reconciliation in large companies with a high volume of transactions when only the balance of the account is needed. 

• Alternate name: Controlling account, adjustment account

A company that sells products on credit may have many transactions in the accounts receivable subledger. The details of those transactions live in the subledger and the balance is reported to the control account. The control account for accounts receivable will only show the total amount that is owed to the company at a point in time without all the details of each customer’s transaction. 

For example, say company XYZ has extended credit to 3,000 clients. Listing each debtor account individual account would clutter a general ledger, so those accounts could be listed in a subledger and consolidated in a control account.

How Control Accounts Work 

Control accounts are an important component of double-entry accounting and make up the foundation of the general ledger. They serve as a summary report of the total balances for each subledger, and allow for a streamlined analysis of a company’s balance sheet without all of the clunky details contained in each subledger. 

Note

For financial reports, the summary balances provided by the control accounts are generally all that’s needed for analysis. 

Depending on the size of a company and the complexity of operations, a general ledger can sometimes contain many control accounts, such as accounts receivable, that are informed by various subledgers. In the general ledger, each of those control accounts are associated with a summary balance. That number is a reconciliation of the many transactions contained in each subledger.

In the case of a company’s accounts receivable, for instance, the details of every transaction, including the customer information, the details of the sale, any refunds, returns, and the payment terms, are recorded and maintained by the accounts receivable subledgers. Those subledgers are totaled for each reporting period, and the totals make up the balance of the accounts receivable control account. In other words, the accounts receivable control account reflects the total amount that a company is owed, while the its subledger shows how much each individual customer owes. 

Note

Smaller companies may be able to rely on control accounts if  they remain balanced using double-entry accounting. With accounts receivable, as invoices go out the control account is debited, which increases the balance. And as payments come in, the control account is credited, decreasing the balance. 

Control accounting both helps produce clean financial reports, and provides checks and balances for accurate reconciliation. In the case of an accounts receivable control account, the subtotal of the customer balances in the subledger must match up to the control account. If it does not, then there is an error somewhere in the books that must be corrected. 

Types of Control Accounts

With the double-entry accounting system, accounts receivable, and accounts payable are the common types of control accounts. 

Note

Depending on the size of the company, goods sold, and the industry, however, additional control accounts may be useful. Since control accounts make up the general ledger, which informs financial reporting, it’s important to make sure there is a control account associated with each aspect of your business.

Some common control accounts may include:

• Accounts Receivable
• Accounts Payable
• Inventory
• Fixed Assets
• Payroll

Accounting software will automatically categorize data and create control accounts and subledgers, allowing for simple data segmenting, as well as accurate accounting practices.  

Key Takeaways

• Control accounts are summary accounts that make up the general ledger and inform financial reporting.
• The control account balances are determined by the transaction details of the associated subsidiary ledgers. 
• Control accounts provide a high-level picture of a company’s transaction records. If the balances in the control account do not match the subtotal of the subledgers, then there is an error that must be remedied.
• Common types of control accounts are accounts payable and accounts receivable, though the individual control accounts depend on a company’s unique profile. 

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