Purchases
Ledger Control Accounts – Training Material
1.
What is a Purchases Ledger Control Account (PLCA)?
The Purchases Ledger Control
Account, also known as the Creditors Control Account, is a summary
account in the general ledger that shows the total amount the business
owes to all credit suppliers (trade creditors).
While the Purchases Ledger (or
Creditors Ledger) contains the detailed accounts of each supplier, the PLCA
gives one total balance representing all outstanding payables.
2.
Why is the PLCA Important?
- Accuracy Check
– Ensures the total of all individual supplier accounts matches the
general ledger balance.
- Error Detection
– Highlights discrepancies caused by omissions, duplications, or mis
postings.
- Financial Reporting
– The PLCA balance is shown in the Balance Sheet under “Trade
Creditors”.
- Efficiency
– Summarises supplier balances without cluttering the general ledger.
3.
Structure of the PLCA
- The PLCA normally shows a credit balance, as it
represents amounts owed to suppliers.
- Each transaction affecting suppliers is posted:
- Credits (Increase):
Purchases invoices, interest charged by suppliers.
- Debits (Decrease):
Payments to suppliers, discounts received, purchase returns.
4.
Common Entries in the PLCA
|
Credit (Increase)
|
Debit (Decrease)
|
|
Credit purchases (invoices)
|
Payments made to suppliers
|
|
Interest or late fees charged by suppliers
|
Purchase returns (credit notes)
|
|
Discounts received
|
|
Contra entries (if a supplier is also a customer)
|
5. Example of a PLCA Posting
At the end of the month, the
following occurred:
- Credit purchase invoices: £18,000
- Payments made to suppliers: £12,000
- Purchase returns: £1,000
- Discounts received: £500
Opening PLCA balance (credit): £8,000.
Step 1: Post to the PLCA
|
Credit (Cr)
|
Debit (Dr)
|
|
Balance b/f £8,000
|
Payments £12,000
|
|
Purchases £18,000
|
Returns £1,000
|
|
Discounts £500
|
|
Total £26,000
|
Total £13,500
|
Balance
c/f: £26,000 - £13,500 = £12,500
(credit).
This £12,500 should match the total
of all individual supplier balances in the Purchases Ledger.
6.
Reconciliation Process
- Add up all balances from the individual supplier
accounts in the Purchases Ledger.
- Compare the total with the PLCA balance.
- Investigate differences (e.g., timing, missing
postings, duplicated entries).
7.
Common Errors Found via PLCA
- Omissions:
Purchases invoice posted to supplier account but not to PLCA (or vice
versa).
- Mis postings:
Wrong side or wrong account.
- Duplications:
Same invoice or payment entered twice.
- Unrecorded credit notes: Returns not posted correctly.
Quick
Recap
- The PLCA is a summary account for all trade
creditors.
- It ensures the general ledger matches the detailed
Purchases Ledger.
- It helps detect errors and fraudulent activity.
- Regular monthly reconciliation is essential.
