Section 7 of 8
The closing balance of the control account should equal the sum of all individual account balances in the sales or purchases ledger. If it does not, there is an error in either:
Reconciliation process:
The reconciliation cannot identify which ledger account contains the error — it only confirms whether one exists.
| Advantage | Detail |
|---|---|
| Independent verification | Totals from books of prime entry are used, not individual postings — a completely separate check |
| Locate errors | Narrows errors to either the control account or the individual ledger — faster to investigate |
| Deter and detect fraud | Unauthorised entries in individual ledger accounts are revealed when the ledger total does not agree with the control account |
| Provides TR / TP totals | The closing balance gives the figure to include in the statement of financial position without listing every debtor individually |
| Division of responsibilities | Different staff can maintain the ledger accounts and the control account — reduces opportunity for undetected fraud |
| Technique | What it checks |
|---|---|
| Trial balance | Arithmetical accuracy of the general ledger (DR = CR) |
| Bank reconciliation | Cash book balance agrees with bank statement balance |
| Control accounts | General ledger control totals agree with individual sales/purchases ledger balances |
None of these techniques catches all possible errors — they are most powerful when used together.
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