Control accounts are a key aspect to any financial system and it's our role to ensure that the data is aligned to the individual accounts. It's all the more important when bearing in mind that it's one of the initial tests conducted by the auditors.

Step-by-step guide

The first thing to bear in mind is that the total balance for the control account need to reflect the total balance in the individual entities. This is best applied by being more specific.

If we had to take into consideration the Customers, we tend to write-off some bad debts. This doesn't mean that the amount has been settled, but simply that we are accruing for what we now deem as lost. This is achieved by posting against our Receivables control Account. However we cannot post the entry at the expense of the balances alignment to the individual entities. Thus as a first rule we need to post against a specific account but not the individual control accounts.

Moreover when vetting the balances we need to make sure that the total balance matches the total individiual balances without the need for futher computation. This is best achieved by setting up the chart of accounts as per follows:

Create a group specifically for the Account Receivables
Within the same group, create a subsidiary group catering specifically for the control Account

The result should look similar to the one below:

Through the above structure we'll immediately realise that the total balance within the individual customers should match the balance within G/L Account 2329 i.e. 906,795.60. The latter differs from the balance at G/L Account 2390 which also includes a balance related to Accrued Interest and another one for Other Receivables.

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