(c) Debtor overpaid the amount owed. Debtor paid his account and later returned goods.

Transcription

1 1 David Odoyo maintains a full set of books of account. He prepares a purchases ledger control account and a sales ledger control account at the end of every month. (a) State two advantages of control accounts. (b) State where David will obtain the relevant figure for each of the following items which appear in his sales ledger control account. (i) Credit sales (ii) discount allowed (iii) bad debts (c) On 1 October 2007 David s sales ledger control account had two balances 4545 debit 130 credit Assuming that there are no errors, explain one reason why a credit balance may occur on a sales ledger control account. (d) On 1 October 2007 the balance brought down on David s purchases ledger control account was 2950, which agreed with the total of the creditors balances in the purchases ledger. He supplied the following information for the month ending 31 October Purchases on credit Returns to suppliers 135 Cheques paid to suppliers Cash discount received from suppliers 85 Cash received from a supplier for an overpayment by David 100 Prepare David Odoyo s Purchases Ledger Control account for the month ended 31 October Ans: (a) it provides instant totals of debtors/ creditors. It proves the arithmetical accuracy of the ledgers they control. Enable the balance sheet to be prepared quickly. May be used to identify ledgers in which there are errors when a trial balance does not agree. Provides a summary of the transactions relating to debtors / creditors for the period. Provides an internal check on the appropriate ledgers may reduce fraud. (b) (i) sales journal (ii) cash book (iii) general journal (c) Debtor overpaid the amount owed. Debtor paid his account and later returned goods. (d) Purchases ledger control account Oct 31 Purchases returns 135 Oct 1 Balance b/d 2950 Bank 4120 Purchases 5050 Discount received 85 Cash 100 Balance c/d Balance b/d 3760

2 2 Abdul Aziz maintains a full set of books of prime (original) entry and prepares a purchases ledger control account and a sales ledger control account at the end of every month. (a) On 1 September 2004 the balances brought down on Adbul s sales ledger control account were: Debit balance 5688 Credit balance 194 He supplied the following information for the month ending 30 September Credit sales 7650 Cash sales 2900 Returns by credit customers 356 Cheques received from credit customers 5430 Cheque received from credit customer (included in the total cheques received) dishonoured by the bank 280 Discounts allowed 264 Provision for doubtful debts at 1 September Bad debts written off 250 Select the relevant figures and prepare Abdul s Sales Ledger Control account for the month ended 30 September There is only one balance on the account at the end of the month. (b) Select one of the items listed in (a) above that should not be included in the sales ledger control account and explain why it does not appear. (c) On 1 October 2004 the debit balance brought down on Abdul s sales ledger control account disagreed with the list of balances in the sales ledger by 280. It is found that the cheque dishonored by the bank has not been recorded in the personal account of the debtor. What is the total of the list of balances in the sales ledger? (d) State where Abdul will obtain the relevant figure for each of the following items which appear in his purchases ledger control account. (i)credit purchases :... (ii) discounts received :... (iii) refunds from credit suppliers :... (e) State two advantages to Abdul of preparing control accounts. Ans: 2(a)

3 2(b) (b) Item appearing in list but not in control account: Cash sales: The double entry is sales account and cash book. They do not appear in a debtor s account and so do not appear in the sales ledger control account. Provision for bad debts: This is the balance on the provision account at the start of the month to cover any future bad debts. It does not appear in a debtor s account and so does not appear in the sales ledger control account. (c) Total of debtors balances: = (d) Source of information for items in the purchases ledger control account: (i) Purchases journal (ii) Cash book (iii) Cash book (e) Advantages of control accounts: provides instant totals of debtors and creditors prove the arithmetical accuracy of the ledgers they control enable the Balance Sheet to be prepared quickly may be used to identify ledgers in which there are errors when a trial balance does not agree provides a summary of the transactions relating to debtors/creditors for the period provides an internal check on the appropriate ledgers may reduce fraud

4 3 Ian Selkirk is a sole trader who maintains a full set of accounting records. He divides his ledger into three sections general ledger, purchases ledger and sales ledger. (a) State and explain one advantage of dividing the ledger into these three sections. (b) Name two accounts which would appear in the general ledger. (c) Ian Selkirk prepares control accounts for his purchases and sales ledgers at the end of each month. On 1 April 2003 the balances brought down on the control accounts were Purchases Ledger Control account 1960 credit Sales Ledger Control account 1750 debit Sales Ledger Control account 100 credit Totals of the journals for April 2003 were Purchases Journal 4190 Sales Journal 5150 Purchases Returns Journal 135 Sales Returns Journal 270 The Cash Book for April 2003 showed Cheques received from debtors 4990 Cheques paid to creditors 3830 Cheque paid to debtor in respect of overpayment 100 Discount allowed 110 Discount received 180 The journal entries for April 2003 showed Bad debts written off 74 Prepare Ian Selkirk s Purchases Ledger Control account and Sales Ledger Control account for the month of April Bring down the balances on 1 May Ans : (a) Work can be shared between several people. Easier for reference as same type of accounts are kept together. Easier to introduce checking procedures. (b) The names of any two suitable accounts either real or nominal accounts which would appear in the general ledger. (c) Purchases ledger control a/c cr ; Sales ledger control a/c Dr. 1456

5 4 Susan Sawka maintains a full set of books of prime (original) entry and writes up a purchases ledger control account and a sales ledger control account at the end of every month. On 1 March 2006 the balances brought down on Susan s purchases ledger control account were as follows: Debit balance 120 Credit balance 9500 Susan Sawka provided the following information for the month ended 31 March 2006: Cash purchases 1660 Credit purchases 7420 Returns to credit suppliers 135 Returns by credit customers 210 Cheques paid to credit suppliers 8780 Cheques received from credit customers 9360 Discounts allowed 240 Discounts received 20 Transfer from a purchases ledger account to a sales ledger account 380 REQUIRED (a) Select the relevant figures and prepare Susan Sawka s purchases ledger control account for the month ended 31 March There is only one balance on the account at the end of the month. (b) State two reasons why it is possible to have a debit balance on a purchases ledger control account. (c) Explain why the information used to write up Susan s purchases ledger control account is obtained from books of prime (original) entry and not from the purchases ledger. Susan Sawka s financial year ends on 31 March Her total purchases for the year were as follows: Cash purchases Credit purchases On 31 March 2006 the balance on the purchases ledger control account agreed with the total of the list of balances in the purchases ledger. All Susan s suppliers allow her a period of 14 days in which to pay her account. REQUIRED (d) Using the closing balance on the purchases ledger control account you prepared in (a) and the information above, calculate the payment period for creditors. (e) State and explain whether you think the creditors will regard Susan Sawka s payment period as satisfactory. Will creditors be satisfied? Explanation

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