A control account is a total account. The sales ledger control account stands for all the trade debtors. Its closing balance should equal the list of balances in the sales ledger.
The idea
Debit the sales ledger control account with amounts that increase what customers owe: the opening debit balances and credit sales. Credit it with amounts that reduce what they owe: cash received, discounts allowed, returns inwards, and bad debts written off. The difference is the closing balance, a debit if customers still owe you money. A credit balance would mean you owe a customer, which happens with overpayments, and it is shown separately rather than netted off without a thought.
The control account is kept in the general ledger. It is a check on the sales ledger, which holds one account per customer. If the control balance and the list of ledger balances disagree, an entry was missed, doubled, or put on the wrong side in one of the two places. The control account does not replace the personal accounts. You still need them to know which customer owes the money. It tells you the total.
What earns the marks
Increases in debtors are debits. Receipts, discounts allowed, returns inwards and bad debts are credits. Discount received belongs to the purchases ledger control, not here. Returns inwards are sales returns. Returns outwards are purchase returns. Swapping the books is a common error. Bring the balance down on the debit if it is an asset. State the date line only if you are drawing the account. The figure matters more than the decoration.
Practice questions
These are practice questions in the style of the paper, with a model answer and a mark scheme. They are not a promise of what your paper will ask.
1Question 1
4 marks
Opening debit balances of debtors 4,000 cedis. Credit sales 9,000. Receipts from debtors 7,000. Discount allowed 200. Returns inwards 300. Prepare the balance of the sales ledger control account. (4 marks)
Credits receipts, discount allowed and returns inwards1 mark
Arithmetic 13,000 minus 7,5001 mark
Closing debit balance 5,500 cedis1 mark
2Question 2
1 mark
What should this closing balance agree with? (1 mark)
Model answer
The total of the debit balances in the sales ledger.
Mark scheme
The list, or schedule, of sales ledger balances1 mark
3Question 3
2 marks
Why is discount received not entered in the sales ledger control account? (2 marks)
Model answer
Discount received is a reduction in what the business owes its suppliers. It belongs in the purchases ledger control account, not in the account for customers.
Mark scheme
It relates to suppliers, or creditors1 mark
The sales ledger control account is only for trade debtors1 mark
Practise Financial Accounting with Anna
More questions on this topic are inside GLearn, marked as you answer, with the reason written out. The first ones need no account.
A total account for trade debtors. Credit sales increase it. Receipts, discounts allowed, returns inwards and bad debts decrease it. The closing debit balance should equal the list of balances in the sales ledger.
Does the control account replace the customers' accounts?+
No. The personal accounts show who owes you. The control account shows the total and checks the arithmetic of the ledger. You need both. A difference between them means an entry was missed or placed on the wrong side. All WASSCE Financial Accounting past questions