The reasons for having control accounts are as follows:
1. Check accuracy
They provide a check on the correctness of the entries made in the personal accounts in the sales ledger and the purchase ledger. It’s very easy to make a mistake when posting, because there can be hundreds of posts to make. Figures can be transposed. Some entries may be completely omitted, resulting in an invoice or payment transaction not showing up in a personal account as it should. By comparing:
o The total balance of the accounts receivable with the total of the individual balances of the personal accounts in the sales ledger.
o The total balance of the creditor account with the total of the individual balances of the personal accounts in the purchase book.
It is possible to identify the fact that mistakes have been made.
2. Location of errors
It could also help in troubleshooting, where posting to control accounts is done daily or weekly, or even monthly. If an employee fails to post an invoice or payment to a personal account, or makes a transaction error, it would be a formidable task to track down the error(s) at the end of a year, say, given the hundreds or thousands of transactions. during the year.
By using the control account, a comparison can be made with the individual balances in the sales or purchase ledger for each week or day of the month, and the error is found much faster than if the accounts did not exist.
3. For internal verification
When there is accounting separate from administrative functions, the control account provides internal verification. The person recording entries in the accounts will act as a check for another person whose job it is to record entries in the sales and purchase ledger accounts.
4. Simpler and faster
Provide receivable and credit balances more quickly to produce a trial balance or balance sheet. Obviously, a single balance in a control account is expected to be simpler and faster than many individual balances in the sales or purchase ledger.
This also means that the number of accounts in the double-entry bookkeeping system can be reduced to a manageable size, since the person accounts are just memorandum accounts and the control accounts provide the accounts required for a double-entry system.