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Control Account in Project Management: Example & How to Measure

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Project management is an art, and those who learn to master the subtle tools of communication, collaboration, and stakeholder engagement can only get things done and achieve the desired outcomes. In pursuit of achieving the desired outcomes, situations often go out of hand of the project manager , creating chaos and uncertainty for the project. Given this, the project manager strives to plan the project outcomes by creating a scope baseline and decomposing user requirements and specifications into manageable work components. This alone may not be enough. A level below this is that the project manager associates a control account in PMP with the work activities to establish a mechanism for monitoring project progress and controlling variations. Today's article lets us understand the purpose of such project placeholders and how they help the project manager come out of critical project situations.

Who Defines the Control Accounts?

Before getting into who creates control accounts, let us first understand what a control account is in project management, the process in which it is created, and how the process functions. A control account is a placeholder work breakdown structure (WBS) component used as a point of control costing or accounting. Such WBS components or control accounts PMP become the control points for all the work packages underneath them in the project. Since all of this decomposition of tasks to formulate the WBS happens in the “Create WBS” process of project management , the control accounts are also defined as a part of this process. Hence, the creator of the WBS, i.e., the project manager, the sponsor, and the project team, defines the control accounts in the project.

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What is the Purpose of Control Accounts?

The purpose of a control accounts pdf, as defined by PMBOK , specifies that a control account pmp is chartered as a management control point at which the project constraints are integrated and project performance is measured. For a project manager looking to set up sound project management processes, it fulfills the following purposes:

• It serves as a tool to organize transactions of a type
• It acts as a general ledger to document and summarize transactions of a kind
• Control accounts become the measurement points for cost, scope, and schedule, thereby helping track project progress and performance and manage variances from planned activities
• Help manage stakeholder expectations and create a hierarchical process structure for deliverables and associated elements.

Imagine you shop monthly for groceries at a hypermarket, and even before you get there, you plan a specific category of items and allocate a budget according to your needs. A control account in PMP fulfills this very purpose, i.e., planning and managing expense categories, tracking variances, and implementing the required reconciliations to rectify accounts for errors. Take up co urses on Project Management to build a foundational understanding of the PMP certification and project management practices.

Integration of Control Accounts

A control account in PMP, abbreviated as CA, helps build a strategic structure by creating a point of intersection for the project constraints, i.e., scope, time, and cost, to come together. The control accounts are positioned in the WBS at points that help fulfill project measurement and define criteria for tracking the constraints. They help reconcile gaps or loopholes at the intersection points to minimize variances and enable strategic alignment. It is very important to note that a control account can have multiple work packages under it, while a work package will be under one and only one control account. This helps create a structure where items are monitored from the bottom of the project, building activity and assignment-based control processes.

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Timing of Control Account Plans

A control account plan (CAP) is similar to a project plan but only at a WBS component level, i.e., it is a subdivision of the project constraints - scope, schedule, and cost at a control account level. A control account plan helps roll items from a lower level to the plan level and vice-versa. Understanding the work breakdown structure and its components is key to where to position control account placeholders to create the proper framework to monitor and control project processes and progress.

A control account plan may have one or more deliverables associated with it, but in terms of timing, it must have at least that much length to measure and review the trend of the control account outcomes. It is generally advised to avoid short-length timings on plans to track control account PMI since the measurability becomes tepid. However, the right length or timing of measurement may depend on the type of project, organization governance framework, project length, etc.

How to Measure a Control Account?

Control accounts are implemented with the idea of answering the million-dollar project management question, i.e., how to measure control accounts?

To measure control accounts, also known as cost accounts, it is essential to first identify them correctly, i.e., associate them with a unique identifier. Once the identifiers are added, control accounts can be measured at a project plan level, an individual assignment level, or control account plan level as per the organizational requirements/regulatory framework.

Cost accounts are also used to tie back assignment accountability to the performing or catering team and can be used to assess and improve their performance.

To define the proper measurement logic for the control accounts, it is important to correctly position them in the WBS hierarchy at a level higher than individual tasks or activities and above the items' lowest decomposition level.

Examples of Control Accounts

In my experience, control account PMP can be used as a strong project management measure to tie commitment to the participating team or organization and set a good example of accounting control. Some key project scenarios that outline control account plan examples include:

• Independent quality assurance activities involve establishing a control account for services availed from third-party or independent agencies to track the actuals against the scope of work, estimated timelines, and planned budgets.
• Blueprinting for a construction project - Blueprinting or design modeling is essential, as planned work cannot be started until the design/blueprint is finalized. In such cases, it is advisable to organize related activities for monitoring and control.
• Debtors and creditors accounts - Maintaining control accounts in PMP at receivables and payables helps manage the flow of cash/settlements at the debtors and creditors level, maintaining sufficient control and transparency.

Besides these, control accounts may be built to maintain and manage organizational payrolls, fixed assets, etc., per the organization’s needs and accounting practices.

Control account PMP is an important project management tool instituted in creating the WBS process to build alignment and create a hierarchical structure of deliverables that can be tracked and managed through the project lifecycle. Integrating control accounts in the WBS can strengthen the project governance model by creating subsets of project elements that can be managed with a unified focus. Control accounts help create points of intersection to eliminate possibilities of risks and gauge the performance of planned activities and the overall project.

Instituting control account systems at a WBS level also facilitates analysis of chargebacks to the project accounts and reconciliation of any missing/differential entries as per the accounting practices. To conclude, control accounts are a powerful mechanism by which project managers strive to bring accountability and transparency and facilitate utilizing organizational resources to fulfill project needs and assess progress from time to time.

Frequently Asked Questions (FAQs)

As control accounts are identified and added to the WBS process’s creation, key inputs include data from the project management plan, project documents, environmental enterprise factors (EEFs), and organizational process assets (OPAs). With these inputs together based on the principles of decomposition and availing expert judgment, the control accounts are ingrained for the project.

WBS provides the overall hierarchy and structure utilizing which the control accounts are created and placed to monitor the cost and assess the performance of a symbolic work element. WBS is the umbrella under which cost or control accounts are created and maintained. Control accounts are like a subset of activities on a WBS, with their scope, schedule, and budget to be monitored and controlled.

The three types of project management control accounts follow accounting principles to substantiate data sanctity and fair accounting practices. Apart from the commonly known accounts receivables (AR) and accounts payables (AP), the other 3 types of control accounts are - payroll accounts, inventory accounts, and fixed assets accounts.

Control accounts help project managers track costs and add earning rules to be applied for earned value analysis. They offer chargeback mechanisms for project-level tasks, activities, and resources to assess progress and track performance while reducing the PM’s efforts in managing finer project details. Besides this, control accounts help confirm reconciliation mechanisms for differences in the account balances as per periods.

Rohit Arjun Sambhwani

Rohit Arjun Sambhwani is an IT professional having over a decade and half of experience in various roles, domains & organizations, currently playing a leading role with a premier IT services organization. He is a post graduate in Information Technology and enjoys his free time learning new topics, project management, agile coaching, and writing apart from playing with his naughty little one Aryan

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• Building Your Business

What Is a Control Account?

Definition and Examples of Control Account

• How Control Accounts Work

Types of Control Accounts

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A control account is a summary account in the general ledger. They show the balance of transactions detailed in the corresponding subsidiary account.

Key Takeaways

• Control accounts are summary accounts that make up the general ledger and inform financial reporting.
• The control account balances are determined by the transaction details of the associated subsidiary ledgers. 
• Control accounts provide a high-level picture of a company’s transaction records. If the balances in the control account do not match the subtotal of the subledgers, then there is an error that must be remedied.
• Common types of control accounts are accounts payable and accounts receivable, though the individual control accounts depend on a company’s unique profile. 

A control account is a general ledger account that only contains the balance of the associated subsidiary account or accounts. The details of a company’s transactions are recorded in various subsidiary ledgers and then balanced and summarized into the corresponding control account.

While subsidiary accounts are critical for recording a company’s transactions, control accounts allow for high-level analysis by simply focusing on the balances of each account. They are especially important for reconciliation in large companies with a high volume of transactions when only the balance of the account is needed. 

• Alternate name: Controlling account, adjustment account

A company that sells products on credit may have many transactions in the accounts receivable subledger. The details of those transactions live in the subledger and the balance is reported to the control account. The control account for accounts receivable will only show the total amount that is owed to the company at a point in time without all the details of each customer’s transaction. 

For example, say company XYZ has extended credit to 3,000 clients. Listing each debtor account individual account would clutter a general ledger, so those accounts could be listed in a subledger and consolidated in a control account.

How Control Accounts Work 

Control accounts are an important component of double-entry accounting and make up the foundation of the general ledger. They serve as a summary report of the total balances for each subledger, and allow for a streamlined analysis of a company’s balance sheet without all of the clunky details contained in each subledger. 

For financial reports, the summary balances provided by the control accounts are generally all that’s needed for analysis. 

Depending on the size of a company and the complexity of operations, a general ledger can sometimes contain many control accounts, such as accounts receivable, that are informed by various subledgers. In the general ledger, each of those control accounts are associated with a summary balance. That number is a reconciliation of the many transactions contained in each subledger.

In the case of a company’s accounts receivable, for instance, the details of every transaction, including the customer information, the details of the sale, any refunds, returns, and the payment terms, are recorded and maintained by the accounts receivable subledgers. Those subledgers are totaled for each reporting period, and the totals make up the balance of the accounts receivable control account. In other words, the accounts receivable control account reflects the total amount that a company is owed, while the its subledger shows how much each individual customer owes. 

Smaller companies may be able to rely on control accounts if  they remain balanced using double-entry accounting. With accounts receivable, as invoices go out the control account is debited, which increases the balance. And as payments come in, the control account is credited, decreasing the balance. 

Control accounting both helps produce clean financial reports , and provides checks and balances for accurate reconciliation. In the case of an accounts receivable control account, the subtotal of the customer balances in the subledger must match up to the control account. If it does not, then there is an error somewhere in the books that must be corrected. 

With the double-entry accounting system, accounts receivable , and accounts payable are the common types of control accounts. 

Depending on the size of the company, goods sold, and the industry, however, additional control accounts may be useful. Since control accounts make up the general ledger, which informs financial reporting, it’s important to make sure there is a control account associated with each aspect of your business.

Some common control accounts may include:

• Accounts Receivable
• Accounts Payable
• Fixed Assets

Accounting software will automatically categorize data and create control accounts and subledgers, allowing for simple data segmenting, as well as accurate accounting practices.  

Colbourne College. “ Unit 10 - Financial Accounting .”

Control plan (Six Sigma) — definition and example

Project managers and business executives are always looking to optimize organizational processes. If you’re in a leadership role, you probably already know about Six Sigma, a continuous improvement framework that’s part of the Lean methodology. You may even be familiar with the five stages of Six Sigma — Define, Measure, Analyze, Improve, and Control (DMAIC).

A control plan is a crucial element of that last stage and is designed to standardize processes established in the four previous stages. Understanding control plans can help you make lasting process changes that improve your organization.

In this article, you’ll learn what a control plan is, including an example, so you can continue your educational journey into Six Sigma. This post will cover:

• What a control plan is

Control plan example

• How to get started with Six Sigma

What is a control plan?

A control plan is a document that provides guidance on how to monitor a process. Control plans are part of the fifth and final phase of the Six Sigma process improvement framework. They help businesses standardize newly adopted processes to increase their uptake and longevity.

Control plans should contain:

• An outline of what the process should look like
• Key variables or metrics to measure the process
• Information on how frequently to measure these variables
• What to do if the results stray from the desired outcomes

The goal of the control plan is to provide guidance so that a process can be successfully replicated over time by different individuals. Originally created for manufacturing, Six Sigma and the Lean methodology are now used in a range of industries including healthcare, education, and the service sector.

There are a variety of control plan formats, but some of the basic information would typically include the industry that the plan is for, the company’s goal, and how the sections of the plan help the company track its progress.

For example, a control plan for a manufacturing product might contain:

• The name of the product
• Its key characteristics, such as size, color, and material
• How to measure those characteristics, including the tool needed
• The acceptable range — also called the tolerance range — for each characteristic
• The testing frequency, possibly as a time period or amount
• How to visualize and evaluate the measurements, perhaps in a chart
• A specific person who will oversee quality control
• Contingencies for particular or unexpected situations

While this example is for a manufacturing product, the same structure and approach could be applied to any business process. Remember, maintaining hard-won gains is as important as making them in the first place. Project teams need to put guidelines in place to ensure processes stay efficient, for instance by creating monitoring and response plans. Process owners should then make sure process changes are maintained and kept current with best practices.

Get started with Six Sigma

Control is one of the critical steps in the Six Sigma framework because it ensures that the processes you’ve refined will be maintained into the future. Without a control plan, processes could revert back to the way they were before, resulting in a loss of essential progress.

If Six Sigma and Lean management sound like they might be right for your business, and you’re interested in learning more, check out one of the additional resources below:

• Learn about Six Sigma to Improve Workplace Processes
• Lean Project Management
• A Guide to Lean Management

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https://business.adobe.com/blog/basics/what-is-six-sigma

https://business.adobe.com/blog/basics/lean

https://business.adobe.com/blog/basics/lean-management

Control Accounts: What They Are and Why You Need Them

If you’re running a business, it’s important to understand accounting concepts well. One key concept is the purpose of control accounts. These special accounts are used to track and report the financial status of specific areas or divisions within a company. But how does this apply to your business? Edgewater CPA Group discusses this and why you need control accounts to manage business finances effectively.

What are Control Accounts & Their Purpose

Control accounts are used in accounting to help ensure the accuracy of financial statements. The purpose of these accounts is to provide a check on the math of individual transactions and to provide a means of reconciling errors. Controls are generally maintained by businesses with complex financial structures, such as multinational corporations. When control accounts are used, businesses can be confident that their financial statements accurately reflect their true financial position. This information allows businesses to make sound decisions based on accurate information.

Examples of These Accounts

There are many different types of accounts, but some of the most common include Accounts Receivable, Accounts Payable, Inventory, and Fixed Assets. Control accounts can be used to track both current and long-term items. For example, Accounts Receivable accounts are used to track customer invoices that have not yet been paid. Inventory accounts are used to track the quantity and value of inventory on hand. And Fixed Asset accounts are used to track the acquisition cost, depreciation expense, and remaining life of major property and equipment items.

Risks of These Accounts

While these accounts are an essential tool for businesses, they also come with a certain amount of risk. Errors in control accounts often lead to discrepancies in financial statements and incorrect tax returns. They can also fraudulently misrepresent a company’s financial position. For these reasons, it is important for businesses to have strict protocols in place. Businesses should also perform regular audits to ensure accuracy and compliance with regulations.

Edgewater CPA Group Can Help Manage Business Finances

When it comes to managing your business finances, Edgewater CPA Group can help! Our team of licensed and knowledgeable professionals loves working with businesses throughout Carmel, IN, and we’d love to work with you! We offer a wide array of services, including bookkeeping , controller, and tax prep . We’ve got everything you need to manage your business and grow . So, give us a call today at (317) 207-9269 .

Guide to Control Account - Earned Value Management

Control Account is a critical component of Earned Value Management in project management. It acts as a management control point to monitor and control cost and schedule performance. Why is it important? A control account is significant as it helps managers to track the performance and forecast the outcomes of a project more accurately. It allows for the integration of scope, schedule, and cost objectives and assists in performance measurement. What is it? Control Account is a management point at which scope, budget (resource plans), actual costs, and schedule are integrated and compared for the earned value performance measurement. It represents a task, work package or a group of work packages for which cost and schedule can be controlled. How it works? Control Account involves the process of planning, assessing, and controlling job costs. It uses Planned Value (PV), Earned Value (EV), and Actual Cost (AC) metrics. The difference between EV and PV is known as Schedule Variance (SV) and between EV and AC gives Cost Variance (CV). Any positive variance indicates good performance whereas negative variance indicates underperformance. Exam Tips: Answering Questions on Control Account 1. Understand the basic concept: Be able to define control account and its purpose. Understanding the structure of Control Account Plan (CAP) can also be very helpful. 2. Know how to apply it: Understand how to calculate Schedule Variance (SV) and Cost Variance (CV) in earned value analysis context. 3. Understand the implications: Understand what the variances indicate about the performance of the project. 4. Practice problems involving control account: Try to solve as many questions as possible. The more you practice, the more confident you'll be during the examination.

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Control Account practice test

A Control Account (CA) is a management control point in a project where scope, cost, and schedule management converge. It is a consolidated report of multiple subprojects, work packages, and project management processes, helping project managers maintain an organized approach to managing projects. Control Accounts are assigned to specific levels within a Work Breakdown Structure (WBS), with budgets and timelines calculated using the aggregated values of lower-level items. They play a central role in Earned Value Management by providing cost and schedule performance data, streamlining performance tracking, and assisting in decision-making.

Time: 5 minutes    Questions: 5

Practice more Control Account questions

• Guide: Control Plan

Daniel Croft

Daniel Croft is an experienced continuous improvement manager with a Lean Six Sigma Black Belt and a Bachelor's degree in Business Management. With more than ten years of experience applying his skills across various industries, Daniel specializes in optimizing processes and improving efficiency. His approach combines practical experience with a deep understanding of business fundamentals to drive meaningful change.

• Last Updated: June 11, 2023
• Learn Lean Sigma

In business it is not uncommon for processes and outputs from processes to be out of control and need action to be taken to address them. This is where Control Plans become extremely useful. Control plans have been developed to support lean Six Sigma process and quality management systems in measuring critical-to-quality (CTQ) measures of processes and their outputs to ensure they remain in control with regular data collection and clear actions to be taken to address issues if they arise. 

Control plans are mostly popularized and used within the manufacturing sector. However, they can be useful for a range of processes that output variables that can be measured and controlled.

Table of Contents

What is a control plan.

A Control Plan in its basic form is a document that outlines the process, steps and actions needed to manage, control, and ensure the quality of a process or product. Developed from the principles of Lean Six Sigma, the tool is used to many industries, such as manufacturing, logistics, automotive, and aerospace.

Control plans may vary slightly from business to business as teams and management tweak them to suit local business needs. However, the Control Plan typically consists of elements such as process input variables, output variables, control points (limits), what measurements are to be taken, and actions to be taken if a deviation occurs. 

Below you can see a good example of how a control plan may look. You can also download this control plan from our template section.

A control plan is usually a tool you will use towards the end of an improvement project, such as in the Control phase of the DMAIC methodology, and continues to serve as a “living document,” which means it is continually reviewed and updated as the process evolves or new data becomes available.

How to Create a Control Plan

Creating a Control Plan is an important process that involves several steps. The guide below will clearly explain each step to guide you through creating a robust and effective Control Plan.

Step 1: Identify the Process

The first step in creating a control plan is to identify a process that you are looking to control. This should be a process that is critical to the quality of your product or service and would have a significant impact on customer satisfaction or operational efficiency if it were to go wrong. Therefore, lend them to a key candidate of a process to control 

It is important to have a clear understanding of the flow of the process, including the inputs and outputs and all the steps involved. It can be useful to use a tool such as a flowchart to map out the process to ensure you fully understand all the elements and variables of the process. 

Step 2: List CTQs (Critical to Quality Characteristics)

Once the process has been identified, the next step in the process is to identify the CTQ characteristics. These are the key attributes or features of the product or service that need to be controlled to ensure quality. The best way to identify what the CTQs are is to understand the customer requirements, such as product specifications.

For example, let’s say a business manufactures brake pads, and the CTQ is the thickness tolerance of the brake pads; this might be ±0.5mm.

Step 3: Select Measurement Methods

Once you have listed all the CTQs that you want to control, decide how you will measure these characteristics. The method that you decide on should be accurate, reliable, and repeatable and follow the principles of Attribute Agreement Analysis (AAA). The measurement method should consider what tools, instruments, or techniques will be used. Additionally, it is important to define the frequency with which the measurement is taken and what the acceptable limits or tolerances are for each CTQ.

Step 4: Determine Control Methods

Now that you know what CTQs you want to control and the methods used to measure them you need to determine the methods of control. Control methods are the strategies, tools or techniques used to ensure that the process stays within the defined limits or customer spec limits.  Popular tools and techniques used to control processes and variables include Statistical Process Control (SPC) charts, Mistake Proofing (Poka Yoke) or Standard Operating Procedures (SOP) / Standard Work Instructions (SWI), which control method you use will depend on the type of process and CTQ identified.

Step 5: Develop Action Plans

If in the event a process or variable goes out of control it is important to take action to address and correct the process and bring it back under control. To do this action plans should be developed as part of the control plan. These action plans define what steps need to be taken to bring the process back within its acceptable limits. 

Like any good action plan it needs make it clear what action needs to be taken and who is responsible for taking that action. 

Step 6: Train the Team

Now that you have developed a control plan its important to ensure that in the event it is needed, it is used. Therefore, you should clearly communicate what the CTQs are, what the operators need to do to measure the process and clarify what actions need to be taken by whom if a process goes out of control. 

Training is key to the success of the control plan being followed.

Step 7: Implement and Monitor

Now that you have developed and trained out the plan, the next step is to officially implement it. This involves putting all the required measures and controls into place. If special tools like calipers or software’s are needed to take measurements, ensure they have what they need. The process then needs to be continuously monitored to ensure the process remains within the stated control limits. Data should then be analyzed at regular intervals to detect and trends or deviations in the process outputs.

Step 8: Review and Update

Finally Step 8, it is important to remember that the control plan is a living document that should be reviewed and updated regularly as the process or CTQs change. Regular reviews will ensure the Control Plan remains effective and relevant. 

By following this process you should be able to develop a robust Control Plan that will help you control your process and ensure quality and drive continuous improvement of the process.

Implementing a Control Plan is beneficial for controlling the quality and performance of processes and preventing defects or quality issues. From identifying the process to training your team, each step is geared towards ensuring that your business operations are as seamless as possible. The goal is not just to maintain current performance levels but to set the stage for continuous improvement.

As we’ve outlined in this guide, creating and implementing a Control Plan is a detailed process involving multiple steps, each is important and builds on the previous step. You should also remember, a Control Plan is a living document must be regularly monitored and updated to its sustain success.

• Westgard, J.O., 2003. Internal quality control: planning and implementation strategies.   Annals of clinical biochemistry ,  40 (6), pp.593-611.
• Mehrasa, M., Pouresmaeil, E., Jørgensen, B.N. and Catalão, J.P., 2015. A control plan for the stable operation of microgrids during grid-connected and islanded modes.   Electric Power Systems Research ,  129 , pp.10-22.

Q: What is a control plan?

A: A control plan is a documented framework that outlines the methods, procedures, and actions necessary to maintain process control and ensure consistent and acceptable outcomes. It helps identify critical control points, measurement methods, control limits, and corrective actions to monitor and manage process performance effectively.

Q: Why is a control plan important?

A: A control plan is important because it helps organizations maintain process stability, minimize process variations, and ensure consistent product or service quality. It provides a systematic approach to monitor, control, and improve processes, leading to reduced defects, improved customer satisfaction, and increased operational efficiency.

Q: How does a control plan fit into the DMAIC methodology?

A: A control plan is a key component of the Control phase in the DMAIC (Define, Measure, Analyze, Improve, Control) methodology. In this phase, the control plan is developed to sustain the improvements made during the earlier phases. It helps ensure that the process remains in control, deviations are promptly addressed, and continuous improvement efforts are sustained.

Q: What are critical control points?

A: Critical control points are specific stages or activities within a process where variations can significantly impact the quality or outcome. These points need to be closely monitored and controlled to prevent defects or deviations from the desired target. Examples include temperature control, pressure control, or specific steps in a manufacturing process.

Q: How are control limits determined?

A: Control limits are determined based on historical data, customer specifications, or statistical analysis. Historical data provides insights into the process performance, while customer specifications define the acceptable range for product quality. Statistical techniques, such as process capability analysis, can help determine control limits based on the process’s inherent variation and the desired level of performance.

Q: What is the role of corrective actions in a control plan?

A: Corrective actions are specified in a control plan to address deviations from control limits or target values. These actions provide a systematic approach to identify and resolve the root causes of variations, ensuring that the process is brought back into control. Corrective actions may involve adjusting process parameters, modifying procedures, retraining employees, or conducting equipment maintenance, among other steps.

Q: Who is responsible for implementing a control plan?

A: Responsibility for implementing a control plan typically falls on the process owner or a designated team responsible for process management and improvement. These individuals or teams are accountable for monitoring the process, collecting data, analyzing it for deviations, and implementing corrective actions when necessary.

Q: How often should a control plan be reviewed and updated?

A: A control plan should be reviewed and updated regularly to ensure its effectiveness and alignment with changing process requirements. It is recommended to review the control plan during regular process performance reviews or when significant changes occur in the process or customer requirements. This helps to adapt the control plan to evolving conditions and continuously improve its efficacy.

Daniel Croft is a seasoned continuous improvement manager with a Black Belt in Lean Six Sigma. With over 10 years of real-world application experience across diverse sectors, Daniel has a passion for optimizing processes and fostering a culture of efficiency. He's not just a practitioner but also an avid learner, constantly seeking to expand his knowledge. Outside of his professional life, Daniel has a keen Investing, statistics and knowledge-sharing, which led him to create the website learnleansigma.com, a platform dedicated to Lean Six Sigma and process improvement insights.

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A control account plan, also referred to by the anagram CAP, is a tool that is used to create a plan for all of the efforts and work to ultimately take place within a control account. Each individual control account plan is made up of some common, distinctive, and specific elements. These elements include a statement of work, in which the general breakdown of tasks to be conducted are delineated, a work schedule, which may be specifically broken down, or may be more broad-based, with the intention of breaking it down further at a later date, as well as a budget, typically broken down in a time-phased manner. Control account plans are typically the most effective to the management of a project when they are developed and implemented at the onset of a project; however they are effective tools to use whenever they are implemented within a project’s life cycle. The term control account plan had previously been referred to as a cost account plan.

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Control Account: Understanding its Role in Financial Management

✅ All InspiredEconomist articles and guides have been fact-checked and reviewed for accuracy. Please refer to our editorial policy for additional information.

Control Account Definition

A “control account” is a general ledger account that summarizes and provides a check on the accuracy of all the detailed subsidiary data. It helps ensure individual transaction records are consistent with the overall total amounts in financial statements.

Understanding Control Accounts in Context

While the control account exists as a pivot of sorts within bookkeeping, it plays an integral role in the wider landscape of financial management and the general accounting system.

Role in Financial Management

Part of financial management hinges on accuracy and timeliness. The crux of a control account’s role in financial management is to enable easy cross-verification of data. Control accounts ensure balances and transactions align correctly with the detailed entries in corresponding subsidiary accounts.

Control accounts simplify the process of large-scale financial reporting, provide a macro-level overview of the company’s financial status, and help streamline financial planning. By compartmentalizing the different types of transactions into sub-accounts and summarizing them together in control accounts, businesses have a more organized view of diverse aspects like inventory or accounts receivable. These control accounts thus facilitate effective decision-making in managing and planning financial strategies.

Control Accounts and the Accounting System

Control accounts function as an inherent component in the broader accounting system architecture. They provide a basis for auditing as auditors often function at higher levels of information summarization. The auditors can thus verify the accuracy of control accounts without a detailed analysis of all the individual entries.

Control accounts further accelerate the financial investigations process. Any discrepancies in the overall figures can quickly be traced back to the associated control account and eventually to the underlying sub-account causing the error.

Relationships with Subsidiary Accounts

Within the financial ecosystem, control accounts and subsidiary accounts share a symbiotic relationship, creating a balanced financial structure. The balance in a control account should be equivalent to the collective balance of linked subsidiary accounts. By creating a correlation between a control account and its subsidiary accounts, a company ensures that any discrepancies or errors can quickly be identified and rectified.

Every transaction that concerns a control account also involves an associated subsidiary ledger. This “control-subsidiary” relationship ensures that the detailed, granular-level transactions conducted on a day-to-day basis (captured in subsidiary accounts) align perfectly with the aggregated, broader-level balances reflected in control accounts.

Importance of Control Accounts

With the global financial landscape growing more complex, the importance of control accounts for businesses cannot be overstated. They serve as a critical line of defense against errors and fraud and provide a clear, organized view of a business’s financial status at any given time.

Control Accounts and Error Prevention

Control accounts help identify discrepancies in financial data quickly and accurately. When the balances in the subsidiary ledgers do not match the balance in the respective control account, it points to an error that needs investigating. This preventative approach can save a company significant time and resources in rectifying financial mistakes.

Control Accounts as a Deterrent against Fraud

The structure of a control account – an aggregate of several similar transactions – naturally acts as a deterrent against fraudulent activities. Given that fraud often involves manipulations of individual transactions, control accounts can bring attention to these illicit activities at an early stage. With each subsidiary ledger scrutinized against the corresponding control account, fraud becomes more difficult to execute and easier to spot.

Encouraging Transparency through Control Accounts

Control accounts’ role in promoting financial transparency in an organization cannot be understated. By providing a snapshot of multiple transactions and accounts, they paint a clear and cohesive picture of financial activity, making it accessible to various stakeholders, from business leadership to external auditors. This type of visibility encourages openness and reduces the chance of misunderstandings or miscommunications about the company’s financial health.

Maintaining Accountability with Control Accounts

Another advantage of control accounts is the principle of accountability they instill within an organization. Staff members responsible for financial transactions know they will be held accountable if discrepancies arise. This responsibility develops a culture of integrity within the business – an invaluable asset for maintaining trust among stakeholders.

Regulatory Compliance and Control Accounts

Lastly, control accounts play a significant role in regulatory compliance. Business regulations, especially in the financial sector, often require meticulous record-keeping and evidence of a sound financial management system. Having well-kept, accurate control accounts not only assists in meeting these requirements but also provides a safeguard during audit inspections.

In essence, control accounts are an essential tool for any business firm looking to effectively manage its finances and meet external regulatory demands.

Types of Control Accounts

Among the variety of control accounts available, some of the most commonly utilized include Accounts Receivable, Accounts Payable, and Inventory Control.

Accounts Receivable

Accounts Receivable refers to the money owed to a business by its clients or customers for goods or services provided on credit. The primary function of this control account is to track all the pending payments that a company is expected to receive in a specific period. The balance in this account increases when sales are made on credit and decreases when payments are received.

Accounts Payable

Opposite to the Accounts Receivable, Accounts Payable represents the amount a company owes for purchasing goods or services on credit from its suppliers or vendors. The role of this control account is to monitor all the pending payments that a company must make. The balance in this account increases with every purchase made on credit and decreases when payments are made.

Inventory Control

Inventory Control account represents the value of goods a business currently owns that are expected to be sold in the future. This control account plays a crucial role in tracking and managing the company’s stock levels. An increase in this account reflects an acquisition of inventory, while a decrease indicates that inventory has been sold or used.

Each of these control accounts serves a unique function and helps in efficient and effective management of a company’s finances. Their proper maintenance and regular reconciliation can provide a business with accurate, timely, and useful financial information, ensuring sound financial health.

Structure of a Control Account

A control account typically follows a structured layout to ensure accurate and efficient recording of all financial processes. At its core, the control account structure consists of various columns that capture specific information.

Columns in a Control Account

This column records the date that a specific transaction takes place. It’s also the date the transaction is entered into the control account for tracking and auditing purposes.

This column will usually contain a brief description or reference of the transaction. It might include the supplier or customer name, an invoice number, or a brief narration of the transaction that helps to provide context around the transaction.

Debit and Credit

These two columns in the control account record the value of the transaction. If the account is being debited, the amount is entered into the debit column. If it is being credited, the amount is entered into the credit column.

The balance column keeps track of the running balance of the control account after each transaction. This is usually a running total that cumulatively adds or subtracts each debit or credit to the previous balance to show the current balance at each point in time.

Recording Transactions

When transactions occur, they are recorded in the control account based on whether they are a debit or a credit transaction. For example, in the case of a sales control account, when a sale is made it would be recorded as a debit in the control account. On the other hand, payments received from debtors would be credited to the account.

Keeping track of the balance column is essential to determine the financial position represented by the control account. For example, a creditor control account’s balance would represent the total amount payable to the company’s suppliers.

In conclusion, the structure of a control account is designed to provide clarity and ease in recording, tracking, and auditing financial transactions. Its structure is central to maintaining accurate financial records and ensuring fiscal accuracy.

Benefits and Limitations of Control Accounts

Utilizing control accounts can offer several significant benefits, particularly in terms of efficiency, accuracy, and risk management.

Control accounts can significantly enhance the efficiency of financial operations. These accounts streamline the accounting process by consolidating transactions from multiple sub-ledgers into a single account. This consolidation saves administrative time and effort, as transactions do not need to be individually verified against the main ledger.

Control accounts also enhance the accuracy of an organization’s financial reporting. By comparing the balances in control accounts with the sum of corresponding sub-ledger accounts, discrepancies can be quickly identified and addressed. This routine reconciliation process helps to maintain the integrity of accounting records, reducing errors and preventing fraud.

Risk Management

From a risk management perspective, control accounts act as an additional checkpoint to detect fraudulent transactions or irregularities. By revealing discrepancies between the main ledger and sub-ledgers, control accounts help safeguard an organization’s financial assets and maintain its fiscal health.

However, like any financial tool, control accounts also come with their potential limitations and complexities.

Complexities

Implementing control accounts can be complex, particularly in large organizations with diverse operations. To use control accounts effectively, organizations must first have a detailed and accurate breakdown of their financial transactions across sub-ledgers. This can involve considerable time and expertise to set up and maintain. Also, resolving discrepancies between the control account and sub-ledgers can sometimes be a time-consuming process, requiring meticulous tracking and investigation.

Limitations in Scope

Lastly, it’s worth noting that control accounts have a somewhat limited scope. They are primarily designed to consolidate and validate transactions for specific types of accounts like accounts payable or receivable, not all transactions within an organization. As such, control accounts alone cannot provide a comprehensive overview of an organization’s overall financial status.

The Role of Control Accounts in Internal Auditing

Control accounts hold a critical role in internal auditing. They serve as a reference point, highlighting the overall picture of numerous economic elements such as sales, purchases, wage expenses, etc. Without control accounts, auditors would be forced to review individual transactions in audit trails, which can be both time-consuming and ineffective due to the complexity of data management.

One of the primary functions of control accounts is maintaining the integrity of financial data. They do this by simplifying the tracking process, allowing auditors to spot discrepancies or irregularities more easily. Control accounts follow the principle of double-entry bookkeeping, thus ensuring that for every financial transaction recorded, there’s a corresponding counter entry.

Ensuring Accuracy

Control accounts serve as a bridge between source data (individual sales invoices, for example) and the general ledger. They help auditors verify accuracy as they summarize transaction information in a manner that can be cross-checked with pertinent sub-ledger balances. This means auditors can validate the figures in general ledger against the total of sub-ledgers, ensuring that the overall account balances are accurate.

Ensuring Completeness

In addition to validity, control accounts help ensure the completeness of financial data. By summarizing all transaction information into one account, auditors can readily assess if any entries are missing or if there are discrepancies between the control account and the detailed listings in related subsidiary accounts. If the total of a control account doesn’t match with the sum of the corresponding subsidiary ledger accounts, it indicates that transactions are either missing or duplicated.

Thus, control accounts act as a safeguard against human error and deliberate fraud, enhancing the robustness of internal auditing. They facilitate an efficient, organized system that enables auditors to confirm the reliability of a company’s financial reports, bringing value to operations and providing assurance to stakeholders.

Control Accounts and CSR

Through effective financial management and accountability, control accounts can indirectly serve Corporate Social Responsibility (CSR) initiatives.

Financial Management and Responsibility

Control accounts are usually the fiduciary responsibility of a company’s financial manager. They manage these accounts to ensure the accuracy and integrity of financial data. Timely financial reports, derived from well-managed control accounts, can reveal whether a company is adhering to its budget, meeting its performance goals, and whether resources are being allocated effectively.

The ability to demonstrate financial accountability is not only important for business operations, but it can also support CSR goals. For instance, accurate financial data can demonstrate to stakeholders that the company is using its resources responsibly and operating sustainably. This transparent financial reporting can help a company reinforce its commitment to ethical business practices, thereby enhancing its CSR profile.

Enforcing Fiscal Discipline

Control accounts indirectly enforce fiscal discipline within the company. They assist in improving financial performance by reducing errors and discrepancies and ensuring that all transactions are recorded and validated.

Moreover, the regular reconciliation process associated with control accounts helps to detect fraud and misuse of funds, thus enhancing the overall fiscal discipline within the organization. This fosters a culture of integrity, reinforcing CSR goals related to ethical corporate behavior.

Enhancing Stakeholder Confidence

Through such financial discipline and accountability, control accounts help to build stakeholder confidence. Stakeholders often seek assurance that the organisations they associate with demonstrate good financial stewardship.

Accurate and transparent financial reports, backed by properly maintained control accounts, help to provide such assurance. They indicate the organisation’s financial stability and its commitment to adhering to regulatory standards and ethical business practices. This can indirectly correlate to higher stakeholder confidence and enhanced reputation, further contributing to CSR objectives.

Thus, while control accounts primarily serve financial and regulatory purposes, their influence extends to the broader realm of CSR by promoting a culture of fiscal discipline, accountability, and transparency.

Sustainability and Control Accounts

An important perspective to consider in management accounting is how the diligent and strategic use of control accounts can support sustainability. Given their capacity for streamlining financial processes and mitigating risks, controlling accounts can be crucial in advancing a company towards its sustainability goals.

Greater Resource Efficiency

One of the central ways in which control accounts support sustainability is through promoting efficient use of resources. These accounts aggregate all similar transactions into a single account. With this consolidation, the process of recording and tracking each transaction becomes significantly smoother and more manageable, which ultimately minimizes administrative workload. Consequently, this efficiency allows for human and financial resources to be re-allocated in support of other sustainability efforts.

Mitigating Losses from Errors and Fraud

Unintentional errors or intentional fraud can lead to substantial financial losses, which are undeniably detrimental to any organization’s sustainability. Control accounts act as a safeguard against this risk by providing a built-in system for cross-verification. By comparing the balance of the control account with the total of individual customer or supplier accounts, discrepancies can be swiftly detected and rectified. This function not only prevents financial loss, but also enhances accountability and transparency, which are key to sustainable business operations.

Strategic Financial Planning

Control accounts also underpin sustainability by supporting strategic financial planning. The regular reconciliation of control accounts provides timely and accurate financial data, which aids management in making informed decisions about the company’s future direction. This forward-focused, proactive approach ensures that the organization remains financially healthy and agile, further contributing to its overall sustainability.

In conclusion, control accounts play a significant yet often overlooked role in promoting sustainability within organizations. By cultivating efficiency, mitigating financial risk and supporting strategic planning, they serve as an indispensable tool in the pursuit of a more sustainable future.

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Project Management Knowledge

Simply explained by a PMI-certified Project Manager

Control Account Plan

A control account plan, also referred to by the anagram CAP, is a tool that is used to create a plan for all of the efforts and work to ultimately take place within a control account . Each individual control account plan is made up of some common, distinctive, and specific elements. These elements include a statement of work , in which the general breakdown of tasks to be conducted are delineated, a work schedule, which may be specifically broken down, or may be more broad-based, with the intention of breaking it down further at a later date, as well as a budget , typically broken down in a time-phased manner. Control account plans are typically the most effective to the management of a project when they are developed and implemented at the onset of a project; however they are effective tools to use whenever they are implemented within a project’s life cycle. The term control account plan had previously been referred to as a cost account plan.

This term is defined in the 3rd edition of the PMBOK but not in the 4th.

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Mudassir Iqbal

WBS is a hierarchal deliverable-oriented graphical representation of all the work needed to be done on the project.  The following represents a different level of this hierarchical representation.

Control Account

A control account is associated with a particular structural module in the Organizational Breakdown Structure (OBS). Control accounts are usually positioned at selected levels in work packages. There may be many control accounts associated with every work package, though, a control account is linked with only one work package at a time.

A control account is a management point in the WBS that provides a way to monitor and control project performance, cost, and schedule.

A control account is an important project management tool that involves the integration of specific and key elements of project-specific constitutes. Once a successful integration takes place, a measurement of the performance to date occurs. The elements that are frequently integrated using the control account tool comprises of the scope of a project, the actual cost, and the project schedule.

Control accounts are typically positioned at diverse strategic points of the project’s work breakdown structure. This is thought to be useful interchanges along with the way of the process and points at which the work is finished in every one of these particular areas that can be integrated and differences are addressed.

Work Package

A Work Package is a collection of related tasks in a project and they are often considered as sub-projects in one major project.

Work packages refer to the lowest unit of work that a project can be segmented when developing your Work Breakdown Structure (WBS). A work package typically comprises of the nature of work involved, specific stakeholders, results of the tasks, technical material used, duration, and geographic location where these tasks will take place. By placing all related tasks together, a work package becomes an easier division to understand. Team members can easily see the association between varying tasks and emphasize those elements that apply to them. As a sub-division of a work breakdown structure, work packages offer a significant level of clarity as every block of associated tasks can be quickly envisaged.

A work package is a smaller, more specific component of the WBS that represents a single, well-defined piece of work that can be planned, executed, and controlled independently. Work packages are typically assigned to a single person or team for completion.

Work packages let for concurrent work to be performed on different components of a project that is parallel to several teams. Every team follows a certain list of defined tasks for the work package and completes in the given time period. As soon as the team finishes their individual work packages, the whole project comes together with perfect integration.

The work package is the work defined at the lowest level of the WBS for which cost and duration can be estimated and managed. The  work package should be defined with a unique identifier

Planning Package

Planning Package offers a valuable means of categorization for the project managers to efficiently collect important elements of the project. The concept refers to the project specific work breakdown structure that exists on the entire scheme below the decoded and already break down control account without any detailed schedule activities. For a comprehensive understanding of a planning package, it is helpful to evaluate the term control accounts. It can be developed at any phase of the project, though its best to be outlined at the beginning of a project.

Planning packages are typically used to define the work that will be performed during a specific phase of the project.

A planning package is a work breakdown structure component below the control account and above the work package with known work content but without detailed schedule activities. It holds the future work.

Before dwelling into the concept of Planning Package and Work Package, let me explain the very important concept of project scope identification i.e progressive elaboration of scope. A detailed scope is planned for the short term while the far/long term is planned at a high level. WBS is segmented at different levels according to the availability of information while duration and costs are estimated with a reasonable degree. Considering the components where details are not evident to the degree to produce verifiable subcomponents of products, services, and outcomes. Here, we are aware of the work through the detailed schedule activities are not possible to determine. This level of decomposition refers to Planning Package. A planning package can be converted into a work package with the lowest level details in defining budget and schedule. Individual work packages form the building blocks of project deliverables and the foundation at which the project is evaluated and monitored.

The planning package concept refers specifically to the project’s particular work breakdown structure component which resides on the grand and total scheme below the already deciphered and already broken down control account however lacking a carefully crafted and elaborately detailed itemization of the project’s defined schedule activities, yet nonetheless containing a fairly lucid delineation of

• A control account has two or more work packages, though each work package is associated with a single control account.
• A control account may include one or more planning packages
• A planning package will be decomposed into a work package when the needed details regarding scope, budget and schedule are defined.
• A control account is a natural management point for planning and control since it represents the work assigned to one responsible organizational element on one project work breakdown structure element.
• Work packages constitute the basic building blocks used in planning, measuring accomplishment, and controlling project work.
• Planning packages are created to describe work within a control account that will occur in the future. Planning packages must have a work scope, schedule, and time-phased budget.

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5 thoughts to “ Control Account, Work Package, Planning Package : PMP/CAPM ”

Excellent explanation !! could please send me a schem represents : Work package; Planning package and Control account (my email is: [email protected] ) Respectfully

so;when we have details about a planning package (scheduled activities, ..etc) it becomes a Work package ?

Inshallah amazing explanation… subahanallah

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Control Accounts

Locked lesson.

• Lesson resources Resources
• Quick reference Reference

About this lesson

Explain the importance control accounts play in balancing the model when used effectively. When to create control accounts, how to create them and where to link their line items.

Exercise files

Download this lesson’s related exercise files.

Quick reference

Understand Control Accounts

When to use

It is necessary to understand how control accounts work when building a Financial Model.

Instructions

Control accounts tell you three key things:

• Number of calculations that need to be entered into the financial statement so that they balance: This is always one less than the number of rows in the control account. The reason it is one less is because the opening balance is simply the closing balance calculated from the period before.  
• The order to build the calculations into the financial statements: This is always row 2 first, then row 3, then row 4 and so on. Think of it this way: assuming no opening balance (which there would not be in the beginning), if there were no sales, there could be no payments received. If there are no sales and no receipts, the difference between them (the amount owed, the Accounts Receivable) would also be zero. It is a logical order.  
• It identifies the key driver: Often you want to undertake sensitivity and scenario analysis in your models, but sometimes you may be unsure which variables should be included in the analysis. Line 2 of the control account is always the key driver. As above, if there were no sales, there could be no payments received. If there are no sales and no receipts, the difference between them (the amount owed, the Accounts Receivable) would also be zero.

In the example above, if the opening balance of Accounts Receivable is $120,000 and we make further sales in the period of $64,700, assuming there are no bad debts (more on that later) and the cash received is $82,750, then the closing balance for Accounts Receivable has to be $101,950. In other words, assuming the opening balance was $120,000, entering:

• Sales of $64,700 in the Income Statement;
• Cash Receipts of $82,750 (as a positive number) in the Cash Flow Statement; and
• Closing Accounts Receivable of $101,950 in the Balance Sheet
• 00:04 Let's keep moving, then, as I set the scene about how we build a financial
• 00:08 model, the order we build it in, why, and what tools are at our disposal.
• 00:13 In particular, I want to look at a very useful tool for
• 00:16 making the balance sheet balance.
• 00:18 You might not know what a balance sheet is yet, but
• 00:20 you know that the name actually implies that it balances.
• 00:23 So that's going to mean net assets equals total equity.
• 00:27 Let's just have a reminder from last time out.
• 00:32 Essentially, there are three financial statements you should be modeling in
• 00:35 a financial model, namely the income statement, the cash flow statement and
• 00:38 the balance sheet.
• 00:40 Link together, put in the checks, and you have it three-way integrated.
• 00:44 That's what the point is.
• 00:46 But, okay, so that's how they link together mathematically.
• 00:51 How do they link together conceptually?
• 00:54 Now, don't be put off by the fact that this slide says conceptual order.
• 00:57 This is the conceptual order from building a model.
• 01:00 What I want to do now is look at the theoretical concept as well, and
• 01:03 to do that, we need to balance the balance sheet.
• 01:06 It's always gotta work.
• 01:07 Now bear in mind,
• 01:08 when we build a model, we will have to have an opening balance sheet.
• 01:13 No matter where we start from, whatever our start date is in a model,
• 01:16 the company either exists at that point in time or it doesn't.
• 01:20 If it doesn't, then its balance sheet is empty.
• 01:22 There's nothing in there, and all the transactions commence thereafter.
• 01:26 If it's already there, then it's going to have a pre-existing balance sheet.
• 01:29 Either way, be it zero or it's populated, we're going to have an opening balance
• 01:34 sheet that somebody, somewhere will have to give to us.
• 01:37 It's got to balance.
• 01:39 It's got to balance.
• 01:40 If it doesn't balance, we mustn't accept it or we can be held responsible for
• 01:45 in building a financial model is that the movement in net assets,
• 01:49 the delta equals the movement in total equity, the corresponding delta.
• 01:53 That's how we can be held responsible for.
• 01:55 Now your day job might also mean that you have to look after the financial
• 01:57 statements.
• 01:58 That's fine, that's a little low on responsibility for you.
• 02:01 But as a modeller, we can only be held accountable for the movement in net assets
• 02:06 equaling the movement in total equity and that's going to be important for
• 02:09 a trick I'm going to employ in the modeling shortly.
• 02:14 The thing I want to bring up in this session in particular
• 02:17 is the concept of control accounts to show in another way how the financial
• 02:21 statements link together.
• 02:22 Even if you are not an accountant, this is very useful for
• 02:26 showing how to get the financial statements to integrate and
• 02:29 how to get that that balance sheet to blessed well balance.
• 02:33 Very, very simple, for
• 02:36 example, let's assume at the beginning of a period you're owed $120,000.
• 02:41 You've sent all these invoices out, and people owe you this amount of money.
• 02:46 In the period, people also give you $64,700.
• 02:48 That means at that point in time, if there's no cash coming in,
• 02:54 and there's no bad debts to write off, you owed $184,700.
• 03:00 You get in the period $82,750.
• 03:02 Now I don't know if that's for money for
• 03:06 a previous period, the current period, whatever.
• 03:08 But I do know that going forward I've actually still got $101,950 owing to me.
• 03:15 And this is what the control account does, it has this b/f and c/f.
• 03:19 B/f stands for brought forward, means from the previous period.
• 03:22 And c/f means carried forward to the next period.
• 03:26 And this is what a balance sheet looks like.
• 03:28 It has four or more, line items typically.
• 03:32 And the opening and closing are always balance sheet items.
• 03:36 No exception.
• 03:37 Always balance sheet items.
• 03:39 And if you think about it, the balance sheet item is just the previous period.
• 03:43 So the top and the bottom are the same account.
• 03:46 So we've only got three accounts here that we need to populate in the financial
• 03:50 statements, and then it will balance.
• 03:52 So a key rule here is that when you construct a balance sheet
• 03:56 control account like this one, you subtract one from the number of rows.
• 04:01 So, we've got four rows here, so you have three.
• 04:03 And that will give you how many calculations you have to put into
• 04:07 the financial statements to get them to balance.
• 04:10 Now most of us were brought up on this idea of debits and credits and
• 04:13 double entry and goodness knows what, and so
• 04:15 there always needs to be an even number of calculations.
• 04:18 As an accountant myself,
• 04:20 I hear of concepts like reversing journals and things like that.
• 04:23 A reversing journal.
• 04:25 Let's just be clear here, let's put back what we should have put
• 04:28 in in the first place because we had to fill it to make double entry work.
• 04:31 If you don't follow that, good, because I'm not gonna teach you that way and
• 04:35 the last time you're going to hear about debits and
• 04:37 credits I hope will be in that last sentence.
• 04:39 This is how it works.
• 04:40 It makes sense to people.
• 04:42 I've started off around $120k.
• 04:46 I have $64,700 coming in.
• 04:48 That means I'm owed $184,700.
• 04:49 People will pay me $82,750.
• 04:50 So if there were no bad debts which could also go in the control account if there
• 04:55 are that would be another deduction that I'm going to be out at the end
• 04:59 of the period, 101,950.
• 05:01 So what if I would populate this in
• 05:05 the financial statements 120,000 would go into the previous period.
• 05:11 64,700 would go into the P and L for the current period.
• 05:15 82,750 will go into the cash flow statement for
• 05:17 the current pay period, as a positive number.
• 05:20 Gotta remember cash receipts is a good thing and therefore,
• 05:24 we put into the balance sheet for this period 101,950 and it would balance.
• 05:27 And I'm gonna actually show you that when we actually build the model.
• 05:31 This is what it's about.
• 05:32 Three things you need to know about control accounts.
• 05:35 How many calculations do you need to do?
• 05:37 One less than the number of lines.
• 05:39 The second thing is what's the key driver?
• 05:41 And that's always the line two item.
• 05:43 If there's no sales, eventually there'll be no accounts receivable brought forward
• 05:47 or carried forward.
• 05:48 And there'll be no money coming in, cuz nobody owes you anything, so
• 05:51 there'll be no cash receipts.
• 05:52 So a key driver should be on line two.
• 05:55 And the third thing it tells you as well in here is the order to modelling.
• 05:59 So we should do the sales before the cash receipts before the accounts receivable,
• 06:02 ignore a top line.
• 06:04 Control accounts are your friend, very, very simple.

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Table of Contents

What is a control account, types of control accounts, usage of a control account, advantages of a control account, how control accounts work , an example of a control account, difference between control and suspense account, control account vs work package, cost baseline vs cost budget (budget), earned value management (evm), what is the meaning of this, pmp® terminologies: cost knowledge area.

A control account records a similar category's bulk transactions and summarizes the balances. The transactions are initially recorded in subsidiary accounts and then transferred to the control account, which is finally reflected in the financial statements.

A control account is a type of account in the general ledger that exclusively reflects the balance of one or more related subsidiary accounts. Companies keep records of their transactions in subsidiary ledgers, consolidated and summarized into the corresponding control account. 

The ending balance in a control account must agree with the total balance of the related subsidiary ledger. If the two balances do not match, it suggests the possibility of an entry being recorded in the control account but not in the subsidiary ledger.

The two most common control accounts are accounts receivable and accounts payable due to the double-entry accounting system. Other types of control accounts are

• Fixed Assets

Accounting software can assist in categorizing data and generating control accounts and sub-ledgers, which enables data segmentation and accurate accounting practices. 

Control accounts are updated daily to reflect the activity level in a company's operations. It is important to complete the posting of all transactions into the control accounts before closing the books at the end of a reporting period. Otherwise, the transactions may remain unrecorded in the financial statements, resulting in discrepancies.

Large organizations typically use control accounts since their high transaction volume demands an organized and efficient way of managing their records. On the contrary, small organizations can usually manage to store all of their transactions in the general ledger and, therefore, do not require a subsidiary ledger linked to a control account.

Since the general ledger cannot handle all the transactional details, a control account keeps everything neatly sorted. It is beneficial when the general ledger keeps track of several accounts. 

Control accounts form the basis of the general ledger. They are an extremely vital element of the double-entry accounting system. They serve as a summarized report of the total balances for each sub-ledger, allowing for a simpler analysis of a company's balance sheet without including all the intricate details of every sub-ledger.

A large organization with several complex operations may have a general ledger that contains many control accounts, such as accounts receivable, based on various sub-ledgers. Each control account is linked to a summary balance in the general ledger, matching the numerous transactions in each sub-ledger.

For example, accounts receivable records every transaction, including customer information, sale particulars, returns, refunds, and payments in its sub-ledger. The sub-ledger is calculated for totals at each reporting period and makes up the accounts receivable control account balance. Therefore, the accounts receivable control account represents the total amount owed to the company, while the sub-ledger displays the amount each customer owes.

Control accounting is a way to produce clean financial reports while keeping checks and balances for precise settlement. The sub-ledgers' customer balances should match the control account for an accurate financial report. Any discrepancies indicate an error in the books that require correction.

A company has numerous customers with outstanding accounts receivable balances. The company maintains separate subsidiary accounts for each customer to record these balances. 

At the end of the reporting period, all these individual accounts are transferred to the accounts receivable control account. This control account is then reflected in the general ledger and financial statements as a single accounts receivable balance. It eliminates the need to keep hundreds of individual accounts.

If the store wants detailed information, they can review the subsidiary accounts. The store can keep its ledger clean and organized by using control accounts, making it easier for its accountants to manage the finances effectively.

These are the main differences between control and suspense accounts:

• A control account serves as a summarized version of the general ledger accounts and is used to monitor them. On the other hand, a suspense account is used for recording unexplained or doubtful entries in financial statements.
• A control account should match the subsidiary accounts since it is a summary. Suspense accounts are temporary holding accounts that store unexplained transactions before they are identified and transferred to the appropriate account.
• Control accounts primarily have accounts receivable and payable to or from subsidiary accounts, while suspense accounts contain the difference between the total debit and credit.

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Once the project scope is divided in the form of Work Breakdown Structure , work packages, and activity level, it is time to track whether a project is reaching its milestones. However, it is very difficult to track a project at a very high level or at the lowest level (the lowest level is the activity level).

So, in order to manage the project better, we make a point between the WBS and work package and call it the Control Account.

Control Account is a management control point where scope, cost, and schedule are integrated and compared to the earned value for performance measurement. Control Accounts are placed at selected management points in the WBS. Each Control Account is defined with a unique code or an accounting number which can be used to link to the performing account system.

The ‘Work Package’ is a deliverable which is obtained after decomposing the WBS. Work packages are further divided into activity levels. A Control Account usually has one or more work packages. The following figure explains the relations or the hierarchy in which each of the components is placed.

During cost estimation, the Project Manager will come up with a figure and will add a contingency reserve which will become the Cost Baseline. On top of the cost baseline, a risk assessment management reserve will be added. This combined figure becomes the budget of the project. So the difference between the cost baseline and the budget is called the risk management reserve, or the unknown risk.

Let’s catch up with some of the terms as well as the formula used to calculate the project progress in terms of earnings. The following table provides both the definition and the formula:

For example, let’s take a project worth $4M that needs to be completed over a span of 4 months. It is assumed that the estimated work roadmap is linearly distributed, in the sense that at the end of the 1st month, 25% of work should be completed at a cost of $1M, at the end of 2nd month 50% will be completed and the spending should be $2M and so on. Let’s take the progress data of this project at the end of the 3rd month. Assume the project is 60% completed at a cost $3.5M. What is the condition of the project?

From the above case, we can define the following values:

Actual Cost(AC)=$3.5M, Earned Value(EV) is 60% of $4M= $2.4M and Planned Value (PV) is 75% of 4$M=$3M.

Now the rest of the calculations are simple:

CV=EV-AC=2.4-3.5=-1.1, SV=EV-PV=2.4-3=-0.6, CPI=EV/AC=2.4/3.5=0.69 and SPI=EV/PV=2.4/3=0.8.

The bottom line is that the project is in bad condition – because of negative values in case of variance and because the performance indices are below 1. The project is over budget, and behind the schedule by values of $1.1M and $0.6M respectively.

And for every $1 spent we are getting only 69 cents and the project is progressing at the rate of 80% originally planned.

This sample problem illustrates how to make EVM calculations.

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7 Tips For Better Cost Control & Expense Control

In order to understand cost control, you must first understand why it is used: monitoring expenses and identifying risks in order to increase profits. Not to be confused with cost management, cost control has its own set of objectives that can save businesses money.

What Is Cost Control?

Cost control is the process of estimating costs in order to plan and adjust a budget. To make accurate cost estimates, all expenses must be monitored, and spending controlled, to accommodate for any changes.

Predicting risks is another key factor in cost control. When you accurately analyze risks before they happen, you can modify the project budget before any change occurs. This decreases the likelihood of exceeding the budget. Construction projects are especially prone to going over budget, but proper cost control prevents this from happening and provides information to make future predictions.

Project cost control begins with monitoring and tracking changes to expenses. These changes are called variations, and they can be either “favorable” or “unfavorable.” These variations can be used to make more accurate predictions in the future.

What Is Expense Control?

Expense control is the process of making direct changes to spending. Ideally, these changes are informed by cost control data. Where cost control focuses on both the big picture and the smaller details, expense control makes immediate changes to spending habits in order to keep projects on track.

In order to track and control expenses, they must be identified and sorted into one of two categories: direct expenses and indirect expenses.

Direct Expenses 

Direct expenses go directly toward a project’s tangible needs. Three of the most common examples of direct expense are materials, labor and equipment. These expenses will be specific to the project and “create” something tangible. Our free estimate template can help you predict and manage your direct expenses.

Indirect Expenses

Indirect expenses are costs that are constantly accumulating in the background. A few common examples of indirect expenses are employee salaries, employee benefits and office/facility rental. Controlling indirect expenses can be the difference between project success and project failure.

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Seven Tips for Better Cost Control

All projects have risks and, more likely than not, experience changes. That doesn’t mean they have to go over budget. These best practices for cost control set your process up for success:

1. Define Important KPIs

For each task or process, a project manager should decide on key performance indicators. These KPIs are predetermined metrics a team establishes before beginning a project, and are referred to throughout the project to check progress .

2. Anticipate Inflation

The cost of goods and services fluctuates depending on market factors. This can result in increased expenses. These price changes necessitate adjustments to budgets and spending. In terms of cost control, you must take these changes into account when preparing for risks and variances.

3. Create Contingency Plans

No matter how well a project is planned, there is still a chance something will go awry. You need to anticipate these financial risks and create strategies for adapting to them without incurring unfavorable variances. Think of these contingencies as backup plans. The more you can imagine the unexpected, the more prepared you are for the worst-case scenario.

4. Track Expenses in Real Time

A crucial aspect of cost control is tracking and documenting expenses. This is the only way to spot variances and correct them going forward. When you track expenses in real-time, you can spot variances and make the appropriate changes. In this way, even unfavorable variances can inform how you control costs for the remainder of the project.

5. Collect Data on a Regular Basis

Consistency is the name of the game. When the project appears to be running smoothly, collecting data can seem a low priority. But when we allow this to happen, the data becomes skewed and less useful going forward. After all, cost control should be about spotting favorable variances as much as it should unfavorable ones.

How often you collect data will differ depending on the size and scope of the project, but a schedule for doing the collection must be set—whether it be weekly, biweekly, monthly, etc.

6. Document all Variations

Even the smallest variations should be documented. They may seem insignificant at the time, but odds are they will come in handy later on. If hourly employees need a few hours of overtime to complete a task, this is an unexpected indirect expense. Little variations like these can seem like flukes, but they can be used to make more accurate budgets in the future.

7. Communicate with the Team

Cost control is not a one-man show. In order to create smarter budgets, you must convey variations and their causes to the entire team. This keeps everyone on the same page and aware of setbacks and successes. Never make the mistake of thinking data isn’t relevant to team members. Cost control is largely about collecting data, but if no one is using it the data becomes useless.

We’ve created a free project dashboard template for Excel to help you track tasks, workload allocation, due dates and costs. Simply enter your project data and monitor your project costs at a glance.

Things to Avoid When Controlling Costs and Expenses

Cost control is a nuanced process, but there are ways to make it a bit less tricky. Here are three common cost management mistakes even the best project managers make. Luckily, they are avoidable when you know what to watch out for:

Neglecting to Consider Indirect Expenses

Indirect expenses are overlooked often. These expenses lurk in the background of any project, but the costs add up. Additionally, when you don’t consistently track indirect expenses , you won’t notice costs like an increase in rent, employee benefits and other forms of inflation. In a perfect world, these expenses would be static, but not accounting for their constant changes can easily send you over budget.

Undervaluing Contractor and Supplier Relationships

A good relationship with a contractor or supplier can make controlling direct expenses much simpler. When you have a strong relationship with a supplier, they may be more likely to inform you of price increases ahead of time. Keeping these relationships healthy can make it easier to renegotiate contracts if need be.

Favorable variances may mean you can buy more supplies or contract more help. Unfavorable variances may mean you need to cut back. Either way, a good relationship makes the process painless.

Not Using Automated Tools

The secret to effective cost control is staying on top of expenses, risks and other factors that affect the budget. In order to do so, you must use tools to manage data, track expenses and resources , create reports and make adjustments to budget in real-time.

When executing these tasks is a long process, the data may have already changed and you can’t document every variation. Instead, use automated solutions that allow you to see all the information you need at once and make the necessary adjustments and reports.

How ProjectManager Helps With Cost Control

ProjectManager is a cloud-based project management solution that allows you to manage every aspect of your project from anywhere you get work done. Cost control requires current data and fast reporting in order to make the most accurate estimates. When you cannot access and update this information on the go, the cost control process is stalled.

Resource Management

Our resource management software allows you to track exactly how resources are being used, then allows you to create reports and spot exactly where these resources could be used more efficiently in order to decrease expenses.

Real-Time Cost Tracking

ProjectManager gives you the power to view all the information you need on one real-time dashboard that reflects any project changes. This means spotting variations before they negatively impact your budget.

Cost and expense control is a data-driven process that requires robust project management software to digest and distribute the information. ProjectManager is a cloud-based project management software with tools, such as a real-time dashboard, that can collect, filter and share your results in scannable graphs and charts. Try it today with this free 30-day trial.

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Disruptions Loom as 17 Air Traffic Controllers Balk at Job Relocation

The F.A.A. is clashing with workers over efforts to relocate them from New York to Philadelphia. Senator Chuck Schumer has denounced the plan.

By Kate Kelly

Reporting from Washington and Westbury, N.Y.

By late July, 17 air traffic controllers will be expected to trade in their headsets, walk out of their aging workplace on Long Island and report to a new office in Philadelphia, part of a plan to address a long-running problem with recruiting enough controllers to manage the skies around New York.

Despite the hefty incentives they have been offered to go along, the workers — unwilling to uproot themselves and their families — are balking at the move, and some powerful members of Congress are helping them fight back.

In a blistering letter sent to the Federal Aviation Administration last week, a group of New York lawmakers, including Senator Chuck Schumer, a Democrat and the majority leader, demanded that the agency abandon plans to force the employees’ relocation this summer.

The move places undue hardship on those workers, legislators argued. The “forced reassignments” by the F.A.A., Mr. Schumer and his colleagues wrote, are “both confusing and outrageous.” The controllers say their family lives would be disrupted, citing new marriages, disabled children and elderly parents they care for.

The fact that the Senate’s most powerful legislator would complain so loudly about a tiny group of workers underscores the power of the controllers’ nerve center in Westbury, N.Y. — an intense workplace whose formidable responsibilities, high-stress environment and strong personalities inspired a magazine story and the 1999 movie “Pushing Tin.”

The anger of the controllers and their supporters is clashing with the desperate effort by the F.A.A. to find and train enough employees willing to tackle the demands of ensuring the smooth and safe flow of aircraft in and out of the New York airspace — its most complex, by all accounts.

The New York hub has for years struggled with chronic vacancies, placing its recent staffing levels at some of the lowest levels in the nation. The F.A.A. hopes that shifting some of the responsibility for the work out of New York to a more affordable place to live will make it easier over time to recruit more controllers, leading to higher levels of staffing and, with that, increased air safety and efficiency.

But the agency’s plan also risks losing some of its more experienced controllers who are resistant to moving, which, perversely, could add to the staffing problems.

The relocations, which are scheduled for July 28, are necessary “to improve efficiency and ensure safety in this region,” Bridgett Frey, an F.A.A. spokeswoman, said in a statement.

The group targeted for the move handles the airspace around Newark Liberty International Airport, which in the view of the F.A.A. can be done just as well from Philadelphia as from Long Island. That is because this group of controllers uses radar scopes, instead of guiding planes from a runway tower overlooking takeoffs and landings.

F.A.A. figures show that staffing gaps last year at the Long Island building affected 4 percent of the 541,136 takeoffs and landings that occurred at New York’s major airports last summer. The agency expects the summer flying season, which begins later this month, to be its busiest since 2010.

The air traffic controllers say they, too, are fighting with safety in mind. They say they need to be in the same room with their New York colleagues, as they are now, to communicate quickly with them in a crisis.

“This is an extremely stressful job,” said Joe Segretto, the controller who is president of the local chapter of the National Air Traffic Controllers Association representing the New York airspace hub. For controllers, he added, being forced by the F.A.A. to relocate away from spouses and children “is going to add a tremendous amount of pressure.”

As moving day draws closer, the fight looms larger. The F.A.A. already put in place a 10 percent reduction in flight volume in the New York area to cope with lower staffing levels at its New York Terminal Radar Approach Control building in Westbury, known internally as N90. But any further staffing issues could mean there simply are not enough controllers to manage the increased volume planned for summer, forcing delays.

The fate of this handful of employees in a work force of more than 14,000 has gotten the attention of Transportation Secretary Pete Buttigieg, even as his workload strains under the demands of tackling jetliner assembly problems at Boeing, investigating the cause of recent train derailments and leading the battle against what the Biden Administration says are “junk fees” charged by airlines.

“The complexity of N90 is more complex than many countries’ entire airspaces,” Mr. Buttigieg said in an interview with The New York Times in December.

Given the low staffing levels at N90, he added, “we know there needs to be more attention there.” Just 59 percent of available controller roles in the building are filled, according to March figures from the F.A.A.

Last June, the F.A.A. was chastised by the inspector general’s office at the Transportation Department, its parent agency, for doing too little to address yearslong shortfalls in controller staffing. Days after those findings were published, United Airlines delayed and canceled flights that affected 150,000 passengers. Scott Kirby, United’s chief executive, blamed the F.A.A. for controller shortages that he said exacerbated a situation in which his pilots were already contending with bad weather in the New York area.

Controllers working at N90, which is housed in a squat, windowless building in suburban Long Island, are responsible for overseeing the early ascent and descent of hundreds of thousands of flights at John F. Kennedy, LaGuardia and Newark airports each year — equating to at least 60 per hour in and out of Newark alone on a typical day or evening shift, according to F.A.A. data. N90 is second to Southern California’s airspace in size but is arguably a more critical cog in the overall system, affecting the punctuality and well-being of hundreds of thousands of passengers each day.

The F.A.A. has battled controller shortages nationwide since the pandemic, which forced pauses in training at both its Oklahoma City academy and on-site at air traffic control hubs around the United States. But N90’s low staffing has been particularly urgent.

The controllers’ jobs are so demanding and specialized that years of experience are customarily required to do them, including 18 to 24 months of hands-on training at N90 after working assignments at less-busy locations. Westbury’s short staffing in recent years has meant that some controllers have earned close to $400,000 a year because of extra pay, according to F.A.A. documents reviewed by The New York Times. At $183,000, the head of the F.A.A., Michael Whitaker, makes much less.

The agency over the years has tried a variety of strategies for filling the vacant jobs at N90, including offering raises and bonuses and using new recruitment tactics. (One hiring effort that targeted candidates with no relevant experience — referred to by some N90 controllers as “off-the-street” hires — was tried, controllers say, without much success.)

The washout rate has remained stubbornly high. Just 32 percent of N90 trainees achieved certification as fully qualified, according to F.A.A. statistics from March, a far lower rate than at comparable facilities. The Transportation Department’s report last year showed that N90 had the fewest supervisors of any Terminal Radar Approach Control, or Tracon, building in the nation, with only eight in place out of 30 authorized slots.

The F.A.A. has been working to relocate some of N90’s controllers to Philadelphia since at least 2020, only to be stymied by both the controllers’ union and New York legislators.

Its most recent effort to negotiate a move with the National Air Traffic Controllers Association began late last year. The two sides came to terms in March, according to documents reviewed by The Times, with a package that included an initial 15 percent incentive bonus and a $75,000 payout for those who moved to Philadelphia permanently. But, lacking an adequate number of volunteers to make the Philadelphia transfer work, the F.A.A. took a tougher stance about six weeks later, according to an April 29 memorandum that was reviewed by The Times: It notified more than a dozen N90 controllers that they would be involuntarily reassigned.

Under urging from the union, Representative Anthony D’Esposito, whose district includes N90, put together the May 7 letter demanding that the F.A.A. rescind its reassignments. In addition to Mr. Schumer, it was signed by Senator Kirsten Gillibrand and four other members of Congress from the region in and around Long Island. Three of them were Republicans, including Mr. D’Esposito.

“You have people who actually have strong, solid jobs, and they’re not moving because they want to — they’re moving because we’re telling them to,” Mr. D’Esposito said in an interview. “It’s not a good situation.”

Some controllers who do not move may be reassigned to new roles at N90. But getting a new role is dependent upon proving to the F.A.A. that a move would create undue hardship and would require training for a new post for a year or more.

The F.A.A., which spent $36 million to renovate and upgrade the Philadelphia Tracon building, has recently tried again to make the relocation attractive. In the April 29 memo in which it mandated the 17 staff moves, the agency raised to $100,000 its incentive bonuses for controllers who relocated to Philadelphia, either temporarily or permanently.

Yet Mr. Segretto, the union chapter president, and many of his members are unwavering.

“We are completely against it,” he said. “It’s forcing air traffic controllers to choose between their career and leave their families, or to resign from their job.”

Mark Walker contributed reporting from Washington.

Kate Kelly covers money, policy and influence for The Times. More about Kate Kelly

US officials doubt Israel can actually eradicate Hamas and achieve a 'total victory'

• US officials have expressed doubt over Israel's ability to completely eliminate Hamas.
• Israeli Prime Minister Benjamin Netanyahu remains firm on the goal to defeat Hamas.
• President Biden has threatened to cut off weapon shipments if Israel assaults Rafah.

US government officials are skeptical Israel can actually achieve its goals and completely eliminate Hamas in Gaza.

"Sometimes when we listen closely to Israeli leaders, they talk about mostly the idea of some sort of sweeping victory on the battlefield, total victory," Deputy US Secretary of State Kurt Campbell told CNN at the NATO Youth Summit. "I don't think we believe that that is likely or possible."

When TV personality Phil McGraw, also known as Dr. Phil, asked Israeli Prime Minister Benjamin Netanyahu in an interview on May 9 whether Israel still plans on eliminating Hamas as its goal in the Israel-Hamas war, Netanyahu confirmed that this plan hasn't changed. He argued that "we have to achieve victory and that means that we have to destroy all these battalions, which we will."

Netanyahu has been adamant that in order to meet this goal and win the war, Israeli forces must assault Rafah, a densely populated city in southern Gaza where about one million Palestinian refugees have fled.

The US has provided Israel with support throughout its war, but President Joe Biden has warned that he would cut off weapon shipments to Israel if it moves forward with an attack on the city.

"Civilians have been killed in Gaza as a consequence of those bombs and other ways in which they go after population centers," Biden told CNN last week. "I made it clear that if they go into Rafah, I'm not supplying the weapons that have been used historically to deal with Rafah, to deal with the cities, to deal with that problem."

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There is currently a Republican-led effort in Congress to force the provision of weapons shipments, but the White House is in firm opposition.

The current US view of what victory looks like in this war appears different than that of Israel. Other members of the Biden administration have weighed in on Israel's progress and plan to defeat Hamas.

"We're seeing parts of Gaza that Israel has cleared of Hamas where Hamas is coming back including in the north, including in Khan Younis," US Secretary of State Anthony Blinken said in an interview with CBS's Margaret Brennan on Sunday.

If the Israelis hit Rafah with a tough offensive, he predicts that "they may go in and have some initial success, but potentially at an incredibly high cost to civilians." And any success they have, he said will likely be "one that is not durable, one that is not sustainable."

"And they will be left holding the bag on an enduring insurgency because a lot of armed Hamas will be left no matter what they do in Rafah," Blinken said. The alternative isn't much better though.

"If they leave and get out of Gaza, as we believe they need to do, then you're going to have a vacuum, and a vacuum that's likely to be filled by chaos, by anarchy, and ultimately by Hamas again," he said.

National Security Adviser Jake Sullivan told reporters on Monday that ultimately, Israel will make its own decisions on strategy and how it will end the war.

"With the question of a strategic endgame, I don't think that's really a question about American influence," he said. "That's a question about Israel's strategy and what Israel chooses to do."

Watch: What happens after the Israel-Hamas war?

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