book-keeping.com - Control Accounts

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Control Accounts

A key task after entering transactions is to ensure the records are complete and accurate. The most dynamic Balance Sheet accounts are used to provide controls for the book-keeper and make sure the data is correct through reconciliation.

Common Control Accounts

Cash accounts - either for petty cash expenses or as a takings control

Bank accounts
Accounts Receivable - often known as a Debtors Control. This control will be broken down by customer and show which invoices are outstanding.

Accounts Payable - often known as a Creditors Control. This control will be broken down by supplier and show which Bills are outstanding.
VAT Control(s) , showing the VAT due or recoverable.

PAYE Control, showing the PAYE due.
Stock Control, showing the value of stock. This control can be broken down by stock items and used for on-going valuation of stock.

This list isn't exhaustive and control accounts are created whenever needed.

Control accounts like the PAYE control are useful as a backstop reminder for when regular payments are missed by showing the outstanding liability.

Reconciliation

Unfortunately, errors and omissions will creep into even the best maintained systems, and to prevent this control accounts should be regularly reconciled - ideally to an independent source.

Bank accounts - usually the most important and dynamic control accounts - are reconciled to the bank statements provided by the bank. This is done by agreeing and marking the transactions one by one and highlighting discrepancies. These discrepancies may be simply transactions in accounts that have not yet 'cleared' in the bank, or maybe when the bank takes a direct debit not already in the accounts. Through the process of highlighting discrepancies, reconciliation also helps detect fraud or unauthorised transactions.

Once the bank has been reconciled, the other controls can be checked for accuracy as well. In the simulations, reconciliations of relevant control accounts are shown using the simulated data.

The question for a book-keeper looking at a balance in the accounts is: 'how do I know it's right?' Building systems around control accounts and reconciliation is how this question is answered.

Next steps: VAT

Unfortunately, errors and omissions will creep into even the best maintained systems, and to prevent this control accounts should be regularly reconciled - ideally to an independent source.
Bank accounts - usually the most important and dynamic control accounts - are reconciled to the bank statements provided by the bank. This is done by agreeing and marking the transactions one by one and highlighting discrepancies. These discrepancies may be simply transactions in accounts that have not yet 'cleared' in the bank, or maybe when the bank takes a direct debit not already in the accounts.	Through the process of highlighting discrepancies, reconciliation also helps detect fraud or unauthorised transactions.
Once the bank has been reconciled, the other controls can be checked for accuracy as well. In the simulations, reconciliations of relevant control accounts are shown using the simulated data.