Control Account Reconciliations

Introduction
The reconciliation is a working to ensure that the entries in the sales and
purchase ledgers (the memorandums, or list of individual balances) agree
with the entries in the control accounts. The totals in each should be exactly
the same. If not it indicates an error in either the memorandum account or
the control account. All discrepancies should be investigated and corrected.
Preparing a control account reconciliation
The format of a control account reconciliation, in this case for receivables, is
as follows:

Illustration Preparing a control account reconciliation

Alston's payables ledger control account is an integral part of the double
entry system. Individual ledger account balances are listed and totalled on a
monthly basis, and reconciled to the control account balance. Information for
the month of March is as follows:
(1)Individual ledger account balances at 31 March have been listed out and
totalled $19,766.
(2)The payables ledger control account balance at 31 March is $21,832.
(3)On further examination the following errors are discovered:

The total of discount received for the month, amounting to $1,715, has
not been entered in the control account but has been entered in the
individual ledger accounts.

On listing-out, an individual credit balance of $205 has been incorrectly

treated as a debit.

A petty cash payment to a supplier amounting to $63 has been

correctly treated in the control account, but no entry has been made in
the supplier's individual ledger account.

The purchases day book total for March has been undercast
(understated) by $2,000.

Contras (set-offs) with the receivables ledger, amounting in total to

$2,004, have been correctly treated in the individual ledger accounts
but no entry has been made in the control account.

Step 1
The total of discount received in the cash book should have been debited to
the payables ledger control account and credited to discount received. Thus,
if the posting has not been entered in either double entry account it clearly
should be. As this has already been entered into the individual ledger
accounts, no adjustment is required to the list of balances.
Step 2
Individual credit balances are extracted from the payables ledger. Here, this
error affects the ledger accounts balance. No adjustment is required to the
control account, only to the list of balances.
Step 3
The information clearly states that the error has been made in the individual
ledger accounts. Amendments should be made to the list of balances. Again,
no amendment is required to the control accounts.
Step 4
The total of the purchases day book is posted by debiting purchases and
crediting payables ledger control account. If the total is understated, the

following bookkeeping entry must be made, posting the $2,000

understatement:
Dr Purchases
Cr Payables ledger control account
As the individual ledger accounts in the payables ledger are posted
individually from the purchases day book, the total of the day book being
understated will not affect the listing of the balances in the payables ledger.
Step 5
Here it is clear that the error affects the control account, not the payables
ledger. Correction should be made by the bookkeeping entry:
Dr Payables ledger control account
Cr Receivables ledger control account