I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART E: PREPARING A TRIAL BALANCE 

 

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 

A control account keeps a total record of a number of individual items. It is an impersonal account 

which is part of the double entry system.   

 

Discounts can be defined as follows. 

 – A 

trade discount is a reduction in the list price of goods, given by a wholesaler or manufacturer to 

a retailer. It is often given in return for bulk purchase orders. 

 – A 

cash (or settlement) discount is a reduction in the amount payable in return for payment in 

 

 

cash, or within an agreed period. 

 

Trade discounts received are deducted from the cost of purchases. Cash/settlement discounts received 

are included as 'other income' of the period. Trade discounts allowed are deducted from the gross sales 

price, and this amount is invoiced to the customer.   

 

If a customer is expected to take up a cash/settlement discount allowed, the discount is deducted from 

the invoiced amount when recording the revenue for the sale. If the customer subsequently does not take 

up the discount, the discount is then recorded as revenue. 

 

If the customer is not expected to take up the discount, the full invoiced amount is recognised as revenue 

when recording the sale. If the customer subsequently does take up the discount, revenue is then 

reduced by the discount. 

 

The two most important control accounts are those for receivables and payables. They are part of the 

double entry system. 

 

Cash books and day books are totalled periodically and the totals posted to the control accounts. At 

suitable intervals, the balances on the personal accounts are extracted and totalled. These balance totals 

should agree to the balance on the control account. In this way, errors can be located and corrected.