The principal use of control accounts is to ____
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Correct Answer: Option A
Explanation:
The principal use of control accounts—such as the sales ledger control account (for debtors) and purchases ledger control account (for creditors) is to help:
Identify and localise errors in the accounting system, especially when reconciling the general ledger with subsidiary ledgers.
Why is this important?
- Control accounts act as summary accounts in the general ledger.
- They allow you to compare the total of all individual accounts in a subsidiary ledger (e.g., all customer accounts in the sales ledger) with the balance in the control account.
- If there's a difference, it signals an error in the postings (e.g., omission, duplication, or incorrect entry), which can then be traced and corrected.
The principal use of control accounts—such as the sales ledger control account (for debtors) and purchases ledger control account (for creditors) is to help:
Identify and localise errors in the accounting system, especially when reconciling the general ledger with subsidiary ledgers.
Why is this important?
- Control accounts act as summary accounts in the general ledger.
- They allow you to compare the total of all individual accounts in a subsidiary ledger (e.g., all customer accounts in the sales ledger) with the balance in the control account.
- If there's a difference, it signals an error in the postings (e.g., omission, duplication, or incorrect entry), which can then be traced and corrected.