21st Century Accounting Tutorials - Receivables

Configure Control Accounts

Control accounts are special accounts used in "accrual" accounting. Control accounts allow you to carry what the customer owes you as an asset and what you owe the vendor as a liability so that these business conditions are reflected on the Balance Sheet.

In Receivables, the Receivables control account contains the sum of the balances in all the customer accounts that have been assigned that control account. You can set up multiple sets of Receivables control accounts, including accounts for receivables, discounts, finance charges, and cash receipts, and assign the sets to appropriate customers or groups of customers.

When the user enters a customer invoice, the system debits the invoice total to the Receivables control account that belongs to the control account set assigned to the customer. The system debits the customer's "account" (the customer's record, not a General Ledger account) and credits the sales income accounts that you specify.

Select Arnold Plumbing if it isn’t already selected.

Run Receivables/Configure/Control Accounts.

At least one set of all four accounts is required before you can set up customers.

The preconfigured set of control accounts that "came with" the company you created is perfect for Arnold Plumbing’s needs. You just need to review the set.

Name. A unique name identifies the set of control accounts.

Receivables account. This is the G/L asset account to which all transactions will be posted for the customer to whom you assign the set.

The Receivables control account is equal to the sum of all customer account balances. Customer charges, payments, and adjustments are posted to the customer account and to the Receivables control account.

Discount account. This is the account to which all discounts will be debited for the customer to whom you assign the set. The discount account is usually a contra-income account.

Finance charge account. This is the income account to which all Finance charges will be posted for the customer to whom you assign the set.

Cash receipts account. This is the asset (cash equivalent) account to which all Cash receipts will be posted for the customer to whom you assign the set.

Use for cash (occasional) sales. You check this box if you want the system to use the cash receipts and discount accounts in this control account set for posting sales to cash (occasional) customers.

You can set up a separate set (thus a separate cash receipts account) for cash customers or use one of the sets you use for regular Receivables customers.

Configure Control Accounts

Receivables: Configure Control Accounts window


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