Control Account Balances

0141607

Hi guys

I was wondering if anybody might be able to help me out.

I am currently studying control accounts. I will admit that I am having difficulty with them. I have to prepare the debtors control account and the creditors contol account. I have just about managed them but I am stuck on the following questions.

1) Reasons for credit balances on the Debtors Contol Account
2) Reasons for debit balances on the Creditors Control Account

I am not expecting anybody to do my work for me but I was hoping someone might be able to help me out and point me in the right direction as I am lost.

Thanks

hivizman

You are very unlikely to get a credit balance on the Debtors' Control Account, or a debit balance on the Creditors' Control Account. These control accounts show the total transactions that are reflected in individual debtors' (trade receivable) accounts and creditors' (trade payable) accounts respectively, so a credit balance on the Debtors' Control Account would mean that, in total, your debtors (customers who buy goods or services on credit rather than for cash) are actually owed money by the business, rather than owing money to the business.

However, you could well have a credit balance on an individual debtor's account, rather than the more usual debit balance. This could arise in various ways - here are three common situations:

1. You have invoiced the customer for goods and the customer has paid for the goods. Subsequently, the customer returns some goods, and is issued with a credit note. In this situation, the business owes the customer and will either repay what the customer originally paid for the goods or set the credit off against future purchases.

2. The customer has ordered some goods and has paid a deposit. The amount received is credited to the customer's account.

3. The customer has paid more than the total amount due to the business in respect of invoiced sales.

You can explain debit balances on individual trade creditor accounts in a similar way.