Which term describes an account in a general ledger that summarizes all accounts in a subsidiary ledger?

• A. Personal account
• B. Control account
• C. Contra account
• D. Nominal account

Answer: (B)

Verified step by step guidance

1. Understand the concept of a subsidiary ledger: A subsidiary ledger is a detailed ledger that contains individual accounts for a specific category, such as accounts receivable or accounts payable.
2. Learn the purpose of a general ledger: The general ledger is the main ledger that summarizes all financial transactions of a company, including totals from subsidiary ledgers.
3. Define a control account: A control account is an account in the general ledger that summarizes the total balances of all individual accounts in a subsidiary ledger. For example, the accounts receivable control account in the general ledger represents the total of all individual customer accounts in the accounts receivable subsidiary ledger.
4. Differentiate between the given terms: A personal account refers to accounts related to individuals or entities, a contra account offsets another account (e.g., accumulated depreciation), and a nominal account is temporary and closed at the end of the accounting period (e.g., revenue or expense accounts). None of these terms summarize subsidiary ledger accounts.
5. Conclude that the correct term for an account in the general ledger summarizing all accounts in a subsidiary ledger is 'Control account.'