The VAT is either owed to HMRC or can be reclaimed, so it’s separated from the business’s figures. We’re going to finish by highlighting a couple of useful differences between the accounts. Returning to our example of the sale and purchase of stationery for one last time, we’re going to conclude by looking at it from Adam’s point of view. In the same way that a bookkeeper will reconcile the SLCA to the Sales Ledger at the end of a period, they will also reconcile the PLCA to the Purchases Ledger. When you access this website or use any of our mobile applications we may automatically collect information such as standard details and identifiers for statistics or marketing purposes.
For example, two invoices might be generated, one from supplier A for 400, and a second from supplier B for 200. So cash purchases should not be entered in the P L Control account which checks the arithmetical accuracy of the purchases ledger. Since it indicates the total trade payables, it shows a credit balance and the modern rule of accounting cannot be broken under any circumstances. Also known as the “Trade creditors control A/C”, it shows the total trade creditors of a company at a given time. In other words, it shows how much in total a business owes to its suppliers at a particular point of time, i.e. the total of Accounts Payable. So cash sales should not be entered in the S L Control account which checks the arithmetical accuracy of the sales ledger.
Sales Ledger Control Account.
The practise of ensuring that the amount in the control accounts and the amounts in the general ledger match is known as ‘reconciliation’. This is typically performed by an accountant who can conduct a thorough investigation of the different amounts. If a business doesn’t pay its suppliers purchase ledger control account on time, the business could be charged interest (in the same way a business might charge a late paying customer). This interest would be credited in the PLCA (as it is increasing the amount owed by the business) and debited to an Interest Charged (or Payable) on Late Payment account.
The purchase ledger control account, or trade creditor control account, is part of the balance sheet and shows at any given time how much you owe to your suppliers. All of the individual transactions posted to your supplier ledger are included in this account, so any invoices, credit notes and payments are recorded. If the closing balances of sales ledger control and the total of balances on the individual trade receivable accounts in the sales ledger agrees, we can presume that there are no errors or fraud occurred in the sales ledger. If the balances differ, it indicate that there are errors in the individual trade receivables accounts in the sales ledger or in the control account.
How to check the arithmetical accuracy of the purchases ledger:
As only a section of the accounting system is self balancing such a system if sometimes referred to as a sectional balancing system. In contrast an accounting system in which all ledgers are individually balanced is referred to as a self balancing system. As this control account contains the summarized information of all the trade payables accounts in the purchases ledger, it is also called as “Total Trade Payables Account”(“Total Creditors Account”). The totals at the bottom are entered into the general ledger accounts and are the double entry. The individual invoice totals will be entered into the individual credit supplier accounts in the purchase ledger.
In common use, control accounts refer to those that would, under ideal circumstances, balance to zero. For example, an inventory control account will hold the balance amount between a stock account updated by stock transactions on the balance sheet and the value of stock on hand multiplied by its unit cost. Reasons for discrepancies include stock losses and gains yet to be “journaled” and the control account measures the differences and provides financial visibility and control of the value of those. If the discrepancy is significant, then actions such as stock counts can be triggered in order to validate stock and correct the balance sheet and clear the control account. For example, “accounts receivable” is the controlling account for the accounts receivable subsidiary ledger. In this subsidiary ledger, each credit customer has their own account with its own balance.