Question

what is the primary trade off to be considered in the establishment of control accounts?

Answer 1

Answer) A control account is the ledger account that only contains the summary accounts. These accounts are prepared showing the total of all the transactions that are stored in the subsidiary ledger accounts in detail. These accounts are helpful to avoid the confusion and provide quick overview of the transactions of similar nature under single head. Control accounts are mostly used in the summarize the account receivable and account payables as these accounts are considered to the accounts with large number of transaction of similar nature on day to day basis. In order to have quick overview of the detailed ledger, these control accounts are helpful. As the nature of the transactions involved in the account receivable or account payable are the part of multiple subsidiary ledgers and are required to separated according to the nature of transaction, these control accounts help in the providing overall summary of the account receivable or account payables to prepare the financial statements with much speed and accuracy and helps to provide financial information to the users who are more interested in the overall profit rather than going into the detailed view. The primary trade off for the establishment of control accounts is provides the quick overview of the financial information and is mostly considered by the larger organizations as their daily basis data is huge and in order to know the information about account receivables at end of day or week, it can be better projected with the help of summary based accounts i.e control accounts.