POA- not as hard as you thought 💭: Chapter 13

Let's start on control accounts:)

Have you ever wondered when you see Trade debtors & Trade creditors in a balance sheet, why is it consolidated as 1 amount/item when the business has 30+ debtors or creditors, finish this chapter and you will know why!

If control accounts comes out in exam,I will be laughing till (maybe) tears comes out😁. It is not difficult.

💨A business has control accounts to totalize or summary the total individual accounts.

☝There are 2 control accounts namely:-

💥Trade Receivables control account &

💥Trade Payables control account.

The purposes of control accounts are:

💥Act as a check of all/total the balances of individual trade receivable and trade payable accounts.

💥Control Accounts helps to facilitate the preparation of trial balance & balance sheet and income statement.

💥If the 2 persons preparing the trade receivable control and individual receivable accounts are different,the person preparing the control account can check and review the person who post into the individual ledger accounts

💨Okay, having know the rationale behind the preparation of Trade Receivable & Payable control accounts let us identify the items inside the accounts and the source of such items.

💨 Its important to identify the source such as the purchase ledger providing the information of the control account. This question may come out either as a question in control account topic or in Special journal topic.

** Do note that the source for Discount allowed and Discount received can only be taken from Cash book as the difference between the amount settled and paid and what the debtor/creditor owes will be the Discount allowed from Debtor and Discount received from creditor.

💨Important* if you still cant gasp the concept of control account ---- just think of the control account as a summary of all the individual debtors account for Trade Receivable Control and individual Creditors for Trade Payable control.... When I adjust one of the individual account let say payment from a debtor, this receipt has to be shown in the Trade Receivable control account too.