Introduction

In this chapter, the focus will be on detailed approach of preparing ledger accounts where by the debtor and creditor accounts have been re-examined to incorporate control accounts, provision for discount allowed and received and valuation of inventory. Therefore, the chapter is made up of three parts with lessons to guide the entrepreneur/learner. At the end of this chapter, the entrepreneur will be able;

 

  1. To prepare control accounts

  2. To compute provision for discount allowable and discount receivable

  3. To value inventory using various methodologies

 

Definition: Control Accounts

Part one entails the preparation of control accounts. Now that you know how to record all transactions affecting different accounts, further need to ensure orderliness is kept is inevitable to the business hence correctness and accuracy of how the posting of the relevant transactions is necessary. In addition, when the number of similar accounts increase, especially of the same class or category such as debtors and creditors accounts, chances of the accounting officers making mistakes or colluding internally or externally are high. This may lead to financial loss to the business.

 

A control account is a ledger account, which is established within the general ledger of the accounting system and sums up all balances in the supplementary accounts/subsidiary or individual accounts. It is an in build account in the master account commonly referred to as the General Ledger (GL). The control ledger account can accommodate as many accounts in term of either hundreds or thousands and even sometimes sub-accounts. There are various types of control accounts that a business can maintain. For instance a small medium, private or even large public limited firms can keep debtor, creditor and inventory control accounts to ensure orderliness in the accounting system. The proceeding lessons will tackle matters of receivable and payable control accounts of a business respectively and all that appertains to this subject but not inventory control account for it will be considered in isolation in this chapter