Control Accounts – Exercise

The following information relates to the general ledger of Rita Enterprise for the month of March 2013:

 

Balances at 1 March 2013 RM
   
Sales Ledger Control Account 19,744
Purchase Ledger Control Account 12,936
   
Transactions for the month of March 2013:  
Cash paid to suppliers (suppliers on credit) 9,058
Interest charged to customers 144
Cash received from customers (customers on credit) 12,488
Bad debts written off 444
Credit purchases 10,712
Purchases returns 480
Freight charged to debtors 192
Discount allowed 270
Discount received from suppliers 188
Credit sales 9,134
Interest charged by creditors 88
Dishonoured cheque returned to customers 296
Sales returns 256
Cash sales 16,864
Cash purchases 1,380
Balances in sales ledger set off against credit balances in purchases ledger 152
Cash refunded to debtors 72

Required:

Prepare the sales and purchase ledger control accounts using the relevant information above.

Advertisements

BUS2231 – Control Accounts – Exercise 1

Try this, I took this from a website…http://www.accounting-basics-for-students.com/-debtors-creditors-control-accounts-question-.html which I also don’t know the answer yet. Why don’t you download this, print it and do it. Bring it to class for further discussion. Simple!

The following is a list of balances relating to Phiri Properties Ltd during 2010. The company maintains a memorandum debtors and creditors ledger in which the individual account of customers and suppliers are maintained.

 

These were as follows:

MK
Debit balance in debtors account      01/01/10                                         66,300.00
Credit balance in creditors account 01/01/10                                          50,600.00
Sunday credit balance on debtors ledger                                                      724.00
Goods purchased on credit                                                                          257,919.00
Goods sold on credit                                                                                      323,614.00
Cash received from debtors                                                                         299,149.00
Cash paid to suppliers                                                                                   210,522.00
Discount received                                                                                              2,663.00
Discount allowed                                                                                               2,930.00
Cash purchases                                                                                                   3,627.00
Cash sales                                                                                                              5,922.00
Bad Debts written off                                                                                        3,651.00
Interest on overdue account of customers                                                     277.00
Returns outwards                                                                                                2,926.00
Return inwards                                                                                                    2,805.00
Accounts settled by contra between debtors and creditors ledgers     1,106.00
Credit balances in debtors ledgers    31/12/10                                                 815.00
Debit balances in creditors ledger    31/12/10                                                  698.00

Required:

(a) Prepare the debtors control account as at 31/12/10.
(b) Prepare the creditors control account as at 31/12/10?

BUS2231 – Control Accounts

What is the purpose of control accounts?

A control account is a summary account in the general ledger. The details that support the balance in the summary account are contained in a subsidiary ledger—a ledger outside of the general ledger.

The purpose of the control account is to keep the general ledger free of details, yet have the correct balance for the financial statements. For example, the Accounts Receivable account in the general ledger could be a control account. If it were a control account, the company would merely update the account with a few amounts, such as total collections for the day, total sales on account for the day, total returns and allowances for the day, etc.

The details on each customer and each transaction would not be recorded in the Accounts Receivable control account in the general ledger. Rather, these details of the accounts receivable activity will be in the Accounts Receivable Subsidiary Ledger. This works well because the employees working with the general ledger probably do not need to see the details for every sale or every collection transaction. However, the sales manager and the credit manager will need to know detailed information on individual customers, including whether a customer recently reduced their account balance. The company can provide these individuals with access to the Accounts Receivable Subsidiary Ledger and can keep the general ledger free of a tremendous amount of detail.

Source: https://www.accountingcoach.com/blog/accounts-receivable-control-account-subsidiary-ledger

Sales Ledger Control Accounts And Purchases Ledger Control Accounts

Two of the most common Control Accounts are Sales Ledger Control Accounts and Purchases Ledger Control Accounts. After posting all transactions the balance of the Control Account and the sum of the detailed records in the Subsidiary Ledger should always be the same. In other words, a control account deals with summarized information while a subsidiary ledger deals with detailed information.  Because the control accounts contain summarized information they are also called total accounts. Therefore a control account for a Sales Ledger can be called a Sales ledger Control accounts or Total Debtors Account. A control account for a Purchases Ledger can be called a Purchases Ledger Control account or a Total Creditors Account.

 Sources of information for entries in Control Accounts

 Control Accounts

Significance of the balances on the control accounts

The closing balances on the sales ledger control accounts should be equal to the sum total of the closing balances on the individual debtor accounts in the sales ledger. It follow as well that the closing balances on the purchases ledger control accounts should be equal to the sum total of the closing balances on the individual creditor  accounts in the purchases ledger. If the respective balances are not in agreement then it would suggest some form of irregularity in the records which would need investigation.

Source: http://wizznotes.com/accounts/control-systems/sales-ledger-control-accounts-and-purchases-ledger-control-accounts

 

Thank you

I would like to take this opportunity to thank all my dear students for the time spent browsing my site and I hope that you found this site interesting and knowledgeable. I hope you will keep on visiting this site and support my intention to bring the best education to you and to the next generation.

Thank you, thank you and thank you.

I pray for your success and good luck to everything you do.

Suspense Account – Warming up

DO NOT THINK this is the final exam questions. Just attempt this to enhance and sharpen your skills.

SUSPENSE ACCOUNT

Balance as per trial balance RM2,400 (Dr)

  1. Sales were undercast by RM800
  2. Remittance of RM1,700 received from Ali, a debtor, was mistakenly credited in a creditor’s account, also by the name of Ali
  3. Purchased from Mydin RM3,600 and no records have been found in any of the books
  4. Payment of electricity to Pos Malaysia RM120 cash was posted as RM210 in the expenses ledger
  5. Purchases were overcast by RM1,000
  6. Discounts received of RM450 was posted into a discounts received account
  7. Depreciation of a machine of RM1,000 was omitted in the expense account
  8. Payment of cheque to Ahmed RM1,500 was recorded in Ahmad’s account
  9. Payment of wages to part timers RM900 was recorded as RM600 in wages account

 

The net profit for the year was recorded as RM27,410.

 

Required:

  1. Journal entries for each of the transaction
  2. Suspense accounts

Statement of corrected net profit for the year.