This paper presents a control architecture for a photovoltaic AC-bus microgrid with a battery storage system. In this microgrid configuration, the 2500 MVA grid is connected to the 250V AC-bus, with a PV and battery storage system. The PV power is controlled by using maximum power point tracking technique with the help of boost converter. Separate local control units are designed using voltage source converters for both PV array and battery storage. The simulation required a set of power electronic elements and electrical transformers to match the microgrid structure. The control signals are generated using proportional integral controllers. The AC-bus microgrid is designed and verified in MATLAB/Simulink environment for grid-tied and islanded mode operations. An energy management system has been developed to adjust the power sharing among the sources. The voltage and real powers in different areas, solar, grid, load and battery storage, are controlled and observed. The simulation results validate the accuracy of the controllers and the energy management system.