IGCSE Accounting — Control Accounts: Notes, Practice Questions & Worked Solutions

IGCSE Accounting 0452 · Section 3: Verification of Accounting Records

Control Accounts

A control account is a summary account that totals up all the individual customer or supplier accounts in one place — a quick way to check that the sales ledger or purchases ledger hasn’t gone wrong somewhere.

1. Sales Ledger Control Account

This summarises all transactions with trade receivables (customers) in one account. Its closing balance should equal the total of all the individual customer balances in the sales ledger.

Side	Includes
Debit	Opening balance, credit sales, dishonoured cheques, interest charged to customers
Credit	Cash/cheques received, discount allowed, sales returns, irrecoverable debts written off, contra entries

Worked example — sales ledger control account Opening balance $2,000. During the month: credit sales $8,000, cash received from customers $6,500, discount allowed $200, sales returns $300, irrecoverable debts written off $100. Find the closing balance.
Closing balance = 2,000 + 8,000 − 6,500 − 200 − 300 − 100 = $2,900

2. Purchases Ledger Control Account

This works the same way, but for trade payables (suppliers).

Side	Includes
Credit	Opening balance, credit purchases
Debit	Cash/cheques paid, discount received, purchases returns, contra entries

3. Contra Entries

A contra entry occurs when a person is both a customer and a supplier of the business, and the two balances are set off against each other, reducing both the sales ledger and purchases ledger control accounts by the same amount.

Common mistakes to watch for

Mixing up which side of the sales ledger control account each item belongs on — receipts and reductions in what’s owed always go on the credit side.
Including cash sales in the sales ledger control account — only CREDIT sales affect trade receivables; cash sales don’t create a receivable at all.
Forgetting a refund to a customer (cash paid back) increases the sales ledger control account balance, since it’s like an additional receivable being created.

Key Vocabulary Recap

Control account — a summary account totalling all individual accounts in a ledger

Contra entry — offsetting a receivable balance against a payable balance for the same person

Syllabus Reference

This note covers IGCSE Accounting 0452 Section 3, Control Accounts: the sales ledger control account, the purchases ledger control account, credit sales/purchases, receipts/payments, discounts, returns, irrecoverable debts, dishonoured cheques, and contra entries.

Practice questions

IGCSE Accounting 0452 · Section 3: Control Accounts — Practice Question Bank (no answers)

Control Accounts — Practice

Covers: sales and purchases ledger control accounts, and contra entries. 10 questions.

State the purpose of a sales ledger control account.

State which side of the sales ledger control account each of the following appears on: (a) credit sales, (b) cash received from customers.

State which side of the sales ledger control account each of the following appears on: (a) sales returns, (b) irrecoverable debts written off.

A sales ledger control account has an opening balance of $2,000. During the month: credit sales $8,000, cash received $6,500, discount allowed $200, sales returns $300, irrecoverable debts written off $100. Calculate the closing balance.

Explain why cash sales are not included in the sales ledger control account.

State which side of the purchases ledger control account each of the following appears on: (a) credit purchases, (b) discount received.

A purchases ledger control account has an opening balance of $3,500. During the month: credit purchases $9,000, payments to suppliers $8,200, discount received $150, purchases returns $250. Calculate the closing balance.

Explain what is meant by a contra entry.

Explain how a dishonoured cheque affects the sales ledger control account.

Q10

State one reason why a business might prepare control accounts.

Worked solutions

Show worked solutions

IGCSE Accounting 0452 · Section 3: Control Accounts — Solutions

Control Accounts — Practice: Solutions

Purpose of a sales ledger control account.

✓It summarises all transactions affecting trade receivables in one account, so its closing balance can be checked against the total of all individual customer balances in the sales ledger — helping to detect errors.

Side for credit sales / cash received.

✓(a) Credit sales — debit side (b) Cash received — credit side

Side for sales returns / irrecoverable debts.

✓(a) Sales returns — credit side (b) Irrecoverable debts written off — credit side

SLCA: opening 2000, sales 8000, cash 6500, discount 200, returns 300, debts 100.

Closing = opening + credit sales − everything reducing receivables

2,000+8,000−6,500−200−300−100

✓$2,900

Why aren’t cash sales in the SLCA?

✓Cash sales are paid for immediately, so they never create a trade receivable (an amount owed by a customer) — the sales ledger control account only tracks credit transactions with customers.

Side for credit purchases / discount received.

✓(a) Credit purchases — credit side (b) Discount received — debit side

PLCA: opening 3500, purchases 9000, payments 8200, discount 150, returns 250.

Closing = opening + credit purchases − everything reducing payables

3,500+9,000−8,200−150−250

✓$3,900

Explain a contra entry.

✓A contra entry occurs when the same person or business is both a customer (trade receivable) and a supplier (trade payable). The two balances are set off against each other, reducing both the sales ledger control account and purchases ledger control account by the same amount.

Effect of a dishonoured cheque on the SLCA.

✓A dishonoured cheque increases the sales ledger control account balance (added on the debit side) — since the customer’s payment didn’t actually go through, they still owe the money, so their debt must be reinstated.

Q10

One reason to prepare control accounts.

✓Any valid reason, e.g. to help locate errors in the sales/purchases ledger, to provide a quick check on total receivables/payables without adding up every individual account, or to help prevent/detect fraud.

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