A control account and the list of customer balances should give the same total. When they do not, a posting is missing or wrong in one of them, and the size of the difference usually points to it.
This lesson is part of finding the cause of a reconciliation difference. It assumes you can prepare a receivables control account.
What are the three steps?
Start by stating the difference and which figure is higher. Then look for one transaction of that size. Finally, compare where that transaction was posted in the control account and in the individual account.
Each step narrows the search, and the last one names the repair.
Worked example: a difference of RM400
A receivables control account closes at RM14 380 (debit). The list of individual customer balances adds to RM14 780. The list is RM400 higher.
Step 1: what does the direction tell you? The list holds more than the control account, so some amount has been left out of the credits on the customer side, or added too much on the debit side.
Step 2: look for one item of RM400. Among the month’s receipts, Ali Hassan paid RM400 by cheque.
Step 3: compare the postings. The cheque was in the cash book and its total was carried to the control account as a credit. It was never posted to Ali Hassan’s account in the sales ledger, so his balance is still RM400 too high.
The repair. Credit Ali Hassan’s account with RM400. The list becomes 14 780 − 400 = RM14 380, which agrees with the control account.
The control account was right all along. The error was in the individual ledger.
When the control account is the wrong one
Suppose the same receipt had been entered in Ali Hassan’s account but missed from the cash book total used for the control account. Then the control account would be RM400 too high and the list would be correct.
To repair that, the control account would be credited with RM400. The method is the same. You find which record carries the transaction and which record lacks it.
The mistake that loses marks
The common slip is to “fix” the difference by adjusting the closing balance of the control account. That hides the problem, and the ledger stays wrong.
Another slip is to treat a difference divisible by nine as a missing item. A number such as 90 can point to a transposed figure, for example 540 copied as 450, so check the copied numbers too.
Check yourself
A receivables control account closes at RM9 650. The list of customer balances adds to RM9 350. A credit sale of RM300 to one customer is suspected. Which record is wrong, and how is it repaired?
Answer
The control account is higher by RM300, so the individual accounts are missing RM300 of debits. The credit sale was recorded in the sales day book, so it reached the control account, but it was not posted to the customer’s own account.
Repair: debit that customer’s account with RM300. The list then adds to RM9 650 and agrees with the control account.
What to study next
Continue with explaining why a balanced trial balance can still contain errors. If the ledgers themselves feel unclear, revisit double entry and ledgers.
For a teacher to trace your own postings with you, see online one-to-one Accounting tuition.