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Control accounts for trade receivables and trade payables

Edexcel IAL Accounting · WAC11 The Accounting System and Costing

A control account is a summary account that uses totals from the books of prime entry. Its balance should equal the total of all the individual customers' (or suppliers') accounts, giving an independent check (spec 1.2.3 and 1.2.4).

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Why keep control accounts

Independent arithmetical check on the trade receivables and payables ledgers: errors can be traced to one ledger.
A quick total of receivables or payables for the trial balance and statements without adding hundreds of accounts.
Helps detect fraud, especially if a different person keeps the control account.
Shows the total owed for credit control.

The control account is usually part of the double entry in the general ledger; the individual accounts are then memorandum records.

Trade receivables ledger control account

Debit: opening balance, credit sales, dishonoured cheques, interest charged, refunds to customers, closing credit balances.

Credit: sales returns, cash and cheques received, discount allowed, irrecoverable debts, contra (set-off), opening credit balances.

Not included: cash sales, trade discount, the allowance for irrecoverable debts.

Debit	£	Credit	£
Balance b/d	18,400	Sales returns	2,300
Credit sales	64,200	Bank	58,900
Bank (dishonoured cheque)	650	Discount allowed	1,250
Interest charged on overdue accounts	120	Irrecoverable debts	940
		Contra: trade payables ledger control	600
		Balance c/d	19,380
	83,370		83,370
Balance b/d	19,380

Trade receivables ledger control account

Trade payables ledger control account

Credit: opening balance, credit purchases, interest charged by suppliers.

Debit: purchases returns, payments, discount received, contra.

A contra arises when a business both buys from and sells to the same firm and sets one balance off against the other: debit the payables control, credit the receivables control.

Debit	£	Credit	£
Purchases returns	1,700	Balance b/d	12,600
Bank	44,200	Credit purchases	48,300
Discount received	820
Contra: trade receivables ledger control	600
Balance c/d	13,580
	60,900		60,900
		Balance b/d	13,580

Trade payables ledger control account

Worked example

Prepare the trade receivables ledger control account from the data shown above.

Debit side total: 83,370 (balance b/d, credit sales, dishonoured cheque, interest).
Credit side before balancing: 63,990 (returns, receipts, discount allowed, irrecoverable debts, contra).
Balance c/d = 19,380.

Answer: Closing balance £19,380 debit: this should equal the total of the customers' accounts.

Key idea: Control accounts use totals from the books of prime entry. Cash sales, trade discount and the allowance for irrecoverable debts never appear in them.

Check yourself

Opening trade receivables £22,000; credit sales £71,500; receipts from customers £68,200; discount allowed £1,400; sales returns £2,600; irrecoverable debts £900; dishonoured cheque £500. Find the closing balance on the trade receivables ledger control account.
Show answer
£20900. Debits 94,000; credits 73,100; balance 20,900.
Opening trade payables £12,600; credit purchases £48,300; payments £44,200; discount received £820; purchases returns £1,700; contra with receivables £600. Find the closing balance on the trade payables ledger control account.
Show answer
£13580. Credits 60,900; debits 47,320; balance 13,580.
A customer is also a supplier. Their £600 debt is set off against the £600 the business owes them. Which entry is correct?
- Debit Trade receivables ledger control, credit Trade payables ledger control
- Debit Bank, credit Trade receivables ledger control
- Debit Trade payables ledger control, credit Trade receivables ledger control
- Debit Trade payables ledger control, credit Bank
Show answer
Debit Trade payables ledger control, credit Trade receivables ledger control. Both balances are reduced: the payable (debit) and the receivable (credit).
Which item is NOT entered in the trade receivables ledger control account?
- Discount allowed
- An increase in the allowance for irrecoverable debts
- A dishonoured cheque from a customer
- Irrecoverable debts written off
Show answer
An increase in the allowance for irrecoverable debts. The allowance is an estimate kept in its own account; no customer's account changes.
Why are cash sales excluded from the trade receivables ledger control account?
- They are recorded in the sales day book
- They are always small amounts
- They are not part of revenue
- No customer owes money for them
Show answer
No customer owes money for them. Control accounts summarise credit customers' accounts.
Which is a purpose of keeping control accounts?
- To replace the trial balance
- To locate errors in a particular ledger more quickly
- To record cash sales
- To value closing inventory
Show answer
To locate errors in a particular ledger more quickly. If the control balance and the list of balances disagree, the error is in that ledger.
A customer's cheque is dishonoured by the bank. How does this affect the trade receivables ledger control account?
- It is credited, reducing the amount owed
- It is not affected
- It is credited and the sale is cancelled
- It is debited, increasing the amount owed
Show answer
It is debited, increasing the amount owed. The customer owes the money again, so the receivable is reinstated.

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Sources

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting specification (issue 2), Unit 1 and Appendices 6 to 8

Last updated 8 November 2026. Spotted a mistake? Tell us.