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Why are control account balances reported in external financial statements while subsidiary account balances are not?
Wiki User
∙ 14y ago
A control account is a summary account in the general ledger. The details that support the balance in the summary account are contained in a subsidiary ledger-a ledger outside of the general ledger. The purpose of the control account is to keep the general ledger free of details, yet have the correct balance for the financial statements. For example, the Accounts Receivable account in the general ledger could be a control account. If it were a control account, the company would merely update the account with a few amounts, such as total collections for the day, total sales on account for the day, total returns and allowances for the day, etc. The details on each customer and each transaction would not be recorded in the Accounts Receivable control account in the general ledger. Rather, these details of the accounts receivable activity will be in the Accounts Receivable Subsidiary Ledger. This works well because the employees working with the general ledger probably do not need to see the details for every sale or every collection transaction. However, the sales manager and the credit manager will need to know detailed information on individual customers, including whether a customer recently reduced their account balance. The company can provide these individuals with access to the Accounts Receivable Subsidiary Ledger and can keep the general ledger free of a tremendous amount of detail. Sourced: http://blog.accountingcoach.com/accounts-receivable-control-account-subsidiary-ledger/ (second result after googling "Control account balances and Subsidiary account balances" ps: lrn2google)
Wiki User
∙ 14y ago
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Why are control account balances reportedd in external financial statements while subsidiary accounts balances are not are subsidiary accounts useful to anyone?
A control account is a summary account in the general ledger. The details that support the balance in the summary account are contained in a subsidiary ledger. The purpose of the control account is to keep the general ledger free of details, yet have the correct balance for the financial statements. The details on each customer and each transaction are recorded in the subsidiary account. Hence, subsidiary account balances are not reported in financial statements because it is not necessary to see the details for every sale or every collection transaction. Yes, subsidiary account balances are useful to the sales manager and the credit manager who will need to know detailed information on individual customers, including whether a customer recently reduced their account balance.
What is an external auditors report?
external auditors focus primarily on controls that affect financial reporting. External auditors have a responsibility to report internal control weaknesses (as well as reportable conditions about internal control)
What is the role of an auditor in terms of the financial statement?
External Auditor has the role to materially evaluate the financial statements and provide his opinion that 'Does financial statements reflects true and fair activities of business' or not.
What is unqualified audited financial statement?
Unqualified audited financial statement is set of financial statements which are audited by external financial auditors and found "True and fair view" of financial statements and clear from any fraud etc.
How often do publicly traded corporations typically prepare financial statements for external reporting purposes?
quartwly
What is the primary objective of financial accounting?
its primary objective is to provide external reports called financial statements to help users analyze an organization's activities.
Who is an internal user of financial statements?
Accounting information is presented to internal users in the form of management accounts, budgets, forecasts andÊfinancial statements. External users are communicated accounting information in the form of financial statements. These users are creditors, tax authorities, investors, etc..
Identify user groups of financial statements and explain what information they are likely to want from them?
One user group for financial statements is external investors. They use the documents to determine whether the business is profitable. Internally, managers look at financial documents to determine whether their department is profitable.
Who are external users of a company's financial statements and why do they need information from this financial statements?
investors,state It is everyone! But more so, people who would like to make an informed decision (In terms of purchasing shares). Hence through the use of financial statements, managed by accounting standards and external government bodies they can ascertain whether a company is making a loss/profit etc and whether they should invest in the company or not. In short to protect members and manage public interest.
Are Bondholders the internal users of company's accounting information?
Generally bondholders would be external users of financial information. Prudent investors would most likely look over a company's external financial statements and disclosures before purchasing bonds from the company.
What are the internal and external users of financial statements?
External Users: 1 - Potential Investors 2 - Banks 3 - Financial Institutions 4 - Governament 5 - Creditors 6 - Suppliers Internal Users 1 - Employees 2 - Management 3 - Share holders etc
What is a qualified audit report?
An audit report is a certification that financial statements are prepared according accepted accounting standards. In case auditors disagree with any issue and state their opinion of the issue in the audit report it is called qualified audit report.
