A control account \qquad A. does not appear on the balance sheet B. holds individual accounts that support a general ledger account C. is equivalent to a contra account and represents the offsetting nature of debits and credits on a firm’s financial statements D. has a balance that equals the sum of the balances in a group of related accounts in a subsidiary ledger
LectureNotes said A control account \qquad A. does not appear on the balance sheet B. holds individual accounts that support a general ledger account C. is equivalent to a contra account and represents the offsetting nature of debits and credits on a firm’s financial statements D. has a balance that equals the sum of the balances in a group of related accounts in a subsidiary ledger
A control account is a summary account in the general ledger. Here’s a detailed explanation of the options provided:
A. Does not appear on the balance sheet
This statement is generally accurate. A control account itself is not directly reported on the balance sheet. Instead, the collective data it summarizes is reported. For instance, an accounts receivable control account aggregates individual customer balances, and the total accounts receivable is shown on the balance sheet.
B. Holds individual accounts that support a general ledger account
This statement is incorrect. A control account does not hold individual accounts; instead, it summarizes the balances of individual accounts maintained in a subsidiary ledger. The individual accounts are found in the subsidiary ledger, while the control account consolidates their totals in the general ledger.
C. Is equivalent to a contra account and represents the offsetting nature of debits and credits on a firm’s financial statements
This statement is incorrect. A contra account is specifically used to reduce the balance of a related account, such as Accumulated Depreciation reducing the value of a Plant Asset account. A control account, on the other hand, summarizes a set of related accounts without the inherent offsetting nature found in contra accounts.
D. Has a balance that equals the sum of the balances in a group of related accounts in a subsidiary ledger
This statement is correct. The control account’s balance must equal the total of the balances of the individual accounts in its subsidiary ledger. For example, the Accounts Receivable control account’s balance should match the sum of all individual customer balances listed in the Accounts Receivable subsidiary ledger.
Based on the explanations above, the correct statement is D: A control account has a balance that equals the sum of the balances in a group of related accounts in a subsidiary ledger.