An individual balance is what one named customer or supplier owes, or is owed. A control total is the figure for the whole ledger. Questions test whether you can tell which is which, and whether you know the control balance should equal the sum of the individual balances.
This lesson follows from building the receivables control account and belongs to control accounts.
Where does each figure live?
A business keeps two layers of records for its credit customers.
- The sales ledger holds one account per customer. Every invoice, payment and return is entered individually. It is a subsidiary book, not part of the general ledger.
- The receivables control account sits in the general ledger. It receives only totals, such as the month’s sales day book total and the month’s cash received.
The same transactions feed both, one by one into the customer accounts and as a total into the control account. That is why the two should agree.
How do the two layers connect?
- Each invoice is posted individually to the debit of the customer’s account.
- The total of the sales day book is posted once to the debit of the control account.
- Each cheque received is posted individually to the credit of the customer’s account.
- The total receipts and returns are posted to the credit of the control account.
- At the end of the month, list the individual closing balances. The total must equal the control account balance.
Worked example
Pelita Printing has three credit customers in June. Opening balances at 1 June were Alia RM 1,200, Bakar RM 2,000 and Chong RM 800.
| Customer | Invoices | Cheques received | Returns |
|---|---|---|---|
| Alia | 3,500 | 1,200 | 300 |
| Bakar | 1,800 | 2,000 | 0 |
| Chong | 3,100 | 500 | 400 |
Individual closing balances:
- Alia: 1,200 + 3,500 − 1,200 − 300 = RM 3,200
- Bakar: 2,000 + 1,800 − 2,000 = RM 1,800
- Chong: 800 + 3,100 − 500 − 400 = RM 3,000
The list of balances totals 3,200 + 1,800 + 3,000 = RM 8,000.
Control account totals: opening 1,200 + 2,000 + 800 = 4,000. Credit sales 3,500 + 1,800 + 3,100 = 8,400. Cheques 1,200 + 2,000 + 500 = 3,700. Returns 300 + 0 + 400 = 700.
| Debit | RM | Credit | RM |
|---|---|---|---|
| Balance b/d | 4,000 | Bank | 3,700 |
| Credit sales | 8,400 | Sales returns | 700 |
| Balance c/d | 8,000 | ||
| 12,400 | 12,400 |
The control balance of RM 8,000 equals the list of individual balances. Both routes give the same total, but only the sales ledger can say that Alia owes RM 3,200.
The mistake to watch for
A common slip is to read an individual balance from the control account.
Mistaken answer: “How much does Alia owe at 30 June?” The student answers RM 8,000 because that is the balance in the control account.
RM 8,000 is what all three customers together owe.
The correction is to match the question to the layer. A question about one named person needs the individual account. A question about all customers, or about the ledger total, needs the control account.
Check yourself
Work on paper first, then open each answer.
1. The sales day book total for the month is RM 31,500. Where is it posted in the control account, and on which side?
Show answer
It is posted once, as a total, to the debit side of the receivables control account. Each invoice is also posted individually to a customer account, which is a separate step.
2. Which of these can you find from an individual customer’s account but not from the control account? (a) total owed by all customers; (b) the amount Bakar owes; (c) total credit sales for the month.
Show answer
(b). The control account only holds totals, so the amount owed by one named customer comes from that customer’s own account.
3. A customer pays RM 600 by cheque. State the entry in the customer’s account and in the control account.
Show answer
In the customer’s account, credit RM 600. The cheque is also part of the month’s total bank receipts, which is posted to the credit side of the control account. The cash book holds the matching debit to bank.
Where this leads next
When one person is both a customer and a supplier, entries can move between the two ledgers, which is the subject of explain a contra between accounts. If the individual balances ever fail to agree with the control account, investigate a difference using a fictional schedule shows how to trace it. The double-entry and ledger trainer is useful for seeing both layers at once.
Some students understand each layer on its own but mix them when a question asks for “the balance”. Spotting that habit is easier with someone watching your working in online one-to-one Accounting tuition.