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What Is A Control Account?

What is a control account

A control account is used in bookkeeping and accounting to efficiently consolidate balances for summary and reporting purposes. They are a core accounting tool that aids ledger integrity and financial statement accuracy.

The idea is to use a control account to ensure that financial statements are accurate by providing an efficient and accurate way to check the ledgers within them.

Some key characteristics of control accounts:

  • Control accounts are used in systems that employ subsidiary ledgers to provide detailed breakdowns of balances.
  • The balance in the control account must equal the total balances of all accounts in the subsidiary ledger at all times.
  • Common examples include Accounts Receivable Control Account and Accounts Payable Control Account.
  • The Accounts Receivable control account summarises the total debits and credits in the customers’ subsidiary ledger.
  • The Accounts Payable control account summarises the total debits and credits in the suppliers’ subsidiary ledger.
  • When transactions occur, the control account and relevant subsidiary account are updated for the same amount.
  • The control account allows managers to quickly review summary balances without digging into the details.
  • Control accounts help spot errors when the total subsidiary ledger balances do not equal the balance in the control account.

Read on for more detail on control accounts, how they’re used, when, and examples to simplify their meaning. 

Control Accounts – An Overview

To anyone working outside of accounting the idea of a control account can be a little daunting to understand but it’s essentially a summary account in the general ledger that totals the balances of the more detailed subsidiary accounts.

A control account is intended to give a high level summary balance without all the minute details hidden in the underlying transaction. These specific details are recorded in the subsidiary account ledger.

In accounting, the accounts receivable control account summarises the total balanced owned by customers but the information pertaining to the individual customer accounts and invoices are kept elsewhere in the accounts receivable subsidiary ledger.

Here is a worked example to demonstrate how control accounts work, without the financial jargon.

  • Imagine a small clothing store that sells shirts, trousers, and jackets. The store owner wants to track how many of each clothing item they have in stock but listing every single item individually would be too complicated and take a long time.
  • So the owner sets up a “control account” for each clothing category; Shirts Control Account, Trousers Control Account and Jackets Control Account. These control accounts will show the TOTAL number of items in each category.
  • Then the owner creates a “subsidiary ledger” for each control account. Shirts ledger lists each style of shirt and the quantity of each, the trousers ledger lists each style of item and the quantity, Jackets ledger lists each style of jacket and quantity.
  • When a new shipment arrives, the owner updates both the control account and subsidiary ledger totals.
    • For example, if 10 new white shirts arrive:
    • Add 10 to the Shirts Control Account total
    • Add 10 to the “white shirts” section of the Shirts Subsidiary Ledger
  • Using this method, the control account totals always match the subsidiary details. This allows the owner to quickly check the overall status of each clothing category without checking all the individual styles.

What Is A Ledger In Accounting?

We’ve mentioned a ledger a few times now, but what is a ledger in accounting? A ledger in accounting is simply a record that stores the information relating to a specific set of accounts. For example, each account has its own ledger keeping track of debits, credits and running balances.

Every business event that impacts a given account is recorded in its ledger and is usually managed initially in accounting software. Ledgers create a clear transaction trail for auditing and compliance.

The information within a ledger can be aggregated for financial statements, reports and audits, and are a key component of accounting systems.

The Role Of Subsidiary Ledgers

Subsidiary ledgers provide the detailed transaction records that support summary control accounts in the general ledger. While control accounts only show net balances, subsidiary ledgers contain granular data including:

  • Source of each payment or receipt
  • Identity of customer/vendor for each entry
  • Specific dates of transactions
  • Individual items, quantities, and prices

This detailed information is needed for tracking accounts receivable, accounts payable, and inventory. But it can clutter the general ledger. Subsidiary ledgers allow transaction specifics to be compartmentalised outside the main books.

The Purpose of Control Accounts

Control accounts are widely used for aggregating large volumes of transactions from subsidiary ledgers. The two most common examples are Accounts Receivable and Accounts Payable control accounts.

Rather than listing every customer invoice or vendor bill in the general ledger, these summaries show the net activity and balances for each type of account. This simplifies the general ledger for reporting purposes.

For control accounts to function properly, their balances must equal the sums of all subsidiary ledger balances. If differences arise, it indicates errors in postings or calculations that must be reconciled.

In summary, subsidiary ledgers provide the details, while control accounts efficiently consolidate balances for summary recording and reporting. The two ledgers must be carefully reconciled.

Advantages & Disadvantages Of Control Accounts

As with any business practice, there will be pros and cons of using control accounts. Here is a brief overview of both:

Advantages of using control accounts

  • Control accounts help to simplify general ledger by reducing clutter and consulting key information on volumes relating to subsidiary transactions.
  • Control account balances help to improve efficiency as managers can quickly review overall financial statuses without wading through lots of individual transactions.
  • Using control and subsidiary accounts leads to better accuracy in finance reporting as it’s easier to spot and correct discrepancies.
  • By breaking down ownership responsibility for control and subledger accounts, fraud is deterred.

Disadvantages of control accounts 

  • The main downside is the workload needed to set up, manage and resolve differences. In large companies, this could be a full time job!
  • Control account managers are responsible for monitoring and verifying account balances – this is an important job that may require additional monitoring.
  • Using control accounts may require additional training time and budget to be allocated to ensure the proper use of control accounts integration with subledgers.

Whilst largely a positive process, control accounts provide great oversight and control processes for accounting but do require additional staffing, training and reconciliation that may make them unsuitable for smaller firms.

What Assurances Can Control Accounts Provide?

When internal verification of ledger accuracy is needed, like in accounts receivable and accounts payable ledgers, control accounts come into their own.

Sales ledger Control Account

The sales ledger in a companies accounting function summarises the total amount of money due from it’s customers. This amount should, if correct, equal the sum of all the individual customer accounts held in the sales ledger subsidiary.

The procedure of comparing the control account with the sales ledger total is called ‘reconciliation’. If this process of reconciliation highlights errors, then further investigation into the posting errors is required so that they can be corrected and the totals in the sales ledger and the control account are updated to match.

Purchase Ledger Control Account

Like the sales ledger account, control accounts are also commonly used for purchase ledgers. Both the sum of the supplier accounts and the purchase ledger control account need to match.

Regular reconciliations between the control and subsidiary ledger are required for accuracy. If any errors are spotted, it’s usually due to double-entry postings of ledger updates not yet being carried through to the control account.

Maintaining alignment between control accounts and subsidiary ledgers is important in creating assurances that ledger postings have been completed and are accurate. This in turn means that accounting teams are working efficiently and diligently which helps external stakeholders and directors feel confident in the quality of the accounts and that financial reporting is a reliable reflection of the company’s position.

Do All Businesses Need To Use Control Accounts?

Not every business needs to use control accounts. As above, this accounting process can take up a significant amount of time which may mean that smaller businesses don’t have the resources needed to deliver this task.

Whilst control accounts are always useful, there are some situations where they will be particularly useful including;

  • Large transaction volumes – Control accounts help when there are frequent or repetitive transactions that would clutter general ledgers, like accounts receivable/payable.
  • Complex operations – Larger companies with multiple business units, locations, products, etc. generate details that are better compartmentalised.
  • Permission restrictions – Control accounts allow restricting access to details by limiting employees to either control or subsidiary ledgers.
  • Automation – Systems that automate sub ledger transactions and reconciliations maximise the benefits of control accounts.
  • Auditing – Control accounts provide balances for audit testing and an audit trail through transaction details.
  • Reporting – Summary balances facilitate efficient financial statements and reporting for management.

The following businesses will typically have a lot of control accounts:

  • Manufacturing – High volumes of inventory, suppliers, and customers.
  • Retail – Large sales transactions and inventory SKUs to track.
  • Financial services – Numerous customer accounts and transactions.
  • Multinationals – Complex structures and regulatory requirements.

The Control Account Process Explained

When setting up a control account, bookkeepers, finance team members and accountants will need to define the account structure and subledger details they want to track. Transactions within the sub ledger are recorded by updating the control account and the subsidiary ledger. For example, a new customer invoice is logged and will increase both the accounts receivable control balance as well as being itemised in the customer sub ledger.

How Do Control Accounts Help Auditing?

Control accounts are useful in auditing because they provide summary balances to look at rather than a lot of individual transaction details that are available in the sub ledgers.

The purpose of the audit will be to verify that the control accounts match the totals of the ledger accounts and that transactions are being properly recorded. If this isn’t the case, then it would be flagged as an issue to be investigated by the auditors so that it can be resolved and a complete audit trail is made.

How To Troubleshoot Control Account Differences

If during the reconciliation process, differences are found between the control account and sub-ledger, the person in charge of rectifying imbalances will need to:

Look for data entry errors. This could be duplicate postings, different times being shown or unsupported entries.

If the source of the error can’t be found by reviewing the sub-ledger, then a formal adjustment of the control account may be needed. This should only be done with the approval of the accounts manager.

If frequent issues between the control and sub ledger exist, this could indicate a weakness in the control account.


The following frequently asked questions on control accounts will simply summarise the key points that we’ve covered above.

What are control accounts and what are they used for?

Control accounts are summary ledger accounts that aggregate balances from detailed subsidiary ledgers. They are used to simplify general ledgers, improve reporting efficiency, reduce errors, and strengthen oversight. Examples include; accounts receivable, accounts payable, inventory, and fixed assets.

How do control accounts work?

Transactions update both the control account and underlying sub ledger for equal amounts. Balances are reconciled. This helps to consolidate reporting, give quicker insights, and promote enhanced control and fraud prevention.

When are they most useful?

High transaction volumes, complex structures, strict regulation, auditing.

Do auditors rely on them?

Yes, control accounts aid audit testing and sub ledgers provide detail.


Control accounts are a useful, important and commonly used process that provides a good overview of the accuracy of ledger accounts. By using a control account to give a summary of more granular details held in the subsidiary ledgers, auditors and accounting teams can easily see where there are any discrepancies within the accounts and then take steps to rectify them.

Control accounts are a fundamental accounting technique used to maintain ledger discipline, improve financial reporting efficiency and accuracy and enable strong auditing.



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