Control account reconciliation format

The standard format

1. List the control account closing balance
2. List the total of the individual ledger balances
3. Compare the two figures
4. Identify errors causing any difference
5. Correct the errors so the two agree

Filled example

Notes

• The control account acts as an independent check on the individual accounts.
• Errors can lie in either the control account or the personal accounts.
• When corrected, the control balance equals the total of the ledger balances.

Building and reading this format

A control account reconciliation proves that a general ledger total agrees with the subsidiary ledger. The total covers all credit customers, or all credit suppliers. It must equal the sum of the individual accounts. The same transactions are recorded twice, once in detail and once in total, so the two should agree. When they do not, the reconciliation finds and explains the difference.

First build the control account from the period's totals. For a sales ledger control account, start with opening trade receivables. Add credit sales.

Deduct cash received from customers, discount allowed, sales returns and any bad debts written off. For example, opening receivables are RM40,000, credit sales are RM120,000, receipts are RM110,000, discount allowed is RM3,000 and returns are RM2,000.

The control account closes at 40,000 + 120,000 − 110,000 − 3,000 − 2,000 = RM45,000. This is what the general ledger says customers owe in total.

Separately, take the balance from every customer account in the sales ledger and add them to get a list total. In a perfect world it also equals RM45,000. In practice the two often differ.

The cause is an error, and it sits on one side only. Some errors affect the control account, such as a day book total posted wrongly or a bank total omitted.

Others affect the list of balances, such as an individual balance left off the list or an account added up wrongly. Correct each error on the side where it occurred.

For example, the list totals RM46,000, but a customer's balance of RM1,000 was counted twice. Removing it brings the list to RM45,000, which agrees with the control account.

When the amended control account balance equals the amended list of balances, the ledgers are consistent. The receivables figure can then be trusted in the statement of financial position. If they still disagree after every known error is corrected, an error remains undiscovered and the figure should not yet be relied on.

Marks are mostly lost by correcting an item on the wrong side. A sales day book undercast affects the control account, so adjusting the list for it is a mistake. An error confined to one customer's account affects the list, not the control account.

Adding an item that should be subtracted widens the gap. Head each section clearly so the reader can tell the control account from the list, and finish with two figures that plainly agree.

If you are unsure which side an error belongs on, we can help. One of our teachers can sort a set of typical errors with you and give you a simple test for each one. Book a trial class

Related how-to

• How to prepare a sales ledger control account
• How to prepare a purchases ledger control account

These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.