What is a Control Account?

//What is a Control Account?
What is a Control Account? 2017-10-02T03:19:19+00:00

Definition: A control account, often called a controlling account, is a general ledger account that summarizes and combines all of the subsidiary accounts for a specific type. In other words, it’s a summary account that equals the sum of the subsidiary account and is used to simplify and organize the general ledger.

What Does Control Account Mean?

The general ledger can have hundreds of accounts from asset and liability accounts to income and expense accounts. More over, each account type can have hundreds of smaller accounts called subsidiary accounts. If every single account was included in the general ledger, it would be very large, unorganized, and difficult to use. That is why control accounts are used to summary data from large numbers of related accounts.

The general ledger account that sums the subsidiary accounts is said to control the balances that are reported in the ledger. Thus, we call it a controlling account. This makes sense because the subsidiary accounts are not directly reported in the GL. They are summarized and posted to the control account that in turn appears in the GL. In this way, the controlling account really does dictate what appears in the GL and what is reported on the financial statements.

Example

Take accounts receivable for example. A company can have hundreds or thousands of customers with current accounts receivable balances. All of these balances are recorded in separate A/R subsidiary accounts. The total of all of these accounts is carried forward into the A/R control account, which appears in the general ledger and the financial statements.

This way the ledger only has one accounts receivable account instead of hundreds. If more information is needed for a specific customer, the subsidiary accounts and records can always be reviewed. As you can see, control accounts drastically clean up the ledger and make it easier for accountants and bookkeepers to use.