The reasons for having management accounts are as follows:
1.Check out on the precision
They offer a examine on the precision of entries manufactured in the individual accounts in the income ledger and purchase ledger. It is very simple to make a mistake in publishing entries, simply because there may be hundreds of entries to make. Figures may possibly get transposed. Some entries might be omitted completely, so that an bill or a payment transaction does not show up in a individual account as it should. By comparing:
o Free account dispenser on the debtors account with the whole of individual balances on the personal accounts in the product sales ledger.
o The overall equilibrium on the lenders account with the total of personal balances on the personal accounts in the acquire ledger.
It is attainable to discover the truth that glitches have been created.
2.Place of errors
It could also help in the area of errors, the place posting to the control accounts are manufactured every day or weekly, or even regular monthly. If a clerk fails to document an invoice or a payment in a private account, or makes a transaction error, it would be a formidable job to identify the mistake or glitches at the conclude of a yr, say, given the hundreds or thousands of transactions during the 12 months.
By making use of the handle account, a comparison with the individual balances in the revenue or acquire ledger can be made for every single 7 days or working day of the month, and the error discovered considerably a lot more speedily than if accounts did not exist.
3.For inner check
Where there is a independent of clerical bookkeeping duties, the control account offers an inside check. The person posting entries to the accounts will act as check out on a various individual whose task it is to submit entries to the sales and acquire ledger accounts.
four.A lot more basically and quickly
To supply debtors and lenders balances more speedily for creating a trial balance or stability sheet. A solitary stability on a control account is obviously expected less complicated and quickly than a lot of personal balances in the sales or acquire ledger.
This signifies also that the quantity of accounts in the double entry bookkeeping program can be stored down to a manageable dimensions, considering that the personal accounts are memorandum accounts only and the handle accounts alternatively give the accounts necessary for a double entry system.