ABSTRACT
The use of a control account requires two separate double entry records, the first to record the fact that the liability has been incurred and the second to record payment of the liability. Four ledgers are used: the ‘creditors control account (client disbursements only)’, the client’s personal ledger account, the cashbook and a memorandum ledger in the name of the supplier of the disbursement service, a medical expert in this example. The creditors control account (figure 3.4.4) shows a balance of £9,400Cr on 10 June which means that the firm owes this sum in unpaid disbursements. When the firm receives the expert’s invoice for £200 on 11 June, the liability to the expert is recorded as a noncash transaction by a credit entry in the creditors control account (folio reference ‘a’), thus increasing the unpaid disbursement liabilities of the firm. The debit entry is made in the client’s personal ledger account (figure 3.4.5) to show that the client is liable for this sum. A memorandum of the credit entry posted to the creditors control account is made in a ledger account opened in the name of the expert to show him as a creditor of the firm (figure 3.4.6, folio reference ‘a1’). This memorandum entry is not part of the double entry bookkeeping, it is just a record of the liability owed to the expert so that individual creditors of the firm may be identified. When the firm pays the expert, the cashbook is updated with a credit entry equal to the payment (figure 3.4.3, folio reference ‘b’) and the debit entry is made in the creditors control account to reduce the balance for unpaid disbursements. Again, a memorandum of the entry posted in the creditors control account is made, this time, a debit, in the expert’s ledger account to show that the firm no longer owes him any money (figure 3.4.6, folio reference ‘b1’).
