QUESTION 1

Balances on customers accounts at 01 August 2002

Debit: $41 580

Credit: $600

Balances on suppliers accounts at 01 August 2002 $27 020

Credit sales invoiced during the month $46 950

Invoices for goods purchased during the month $26 380

Contra settlements between suppliiers for credit transactions $750

Cash sales during the month $14 150

Cash paid to suppliers for credit transactions $25 260

Cash discount deducted from payments to suppliers $590

Provision for doubtful debts $950

Customer balances written off as bad debts $450

Goods returned to suppliers $620

Credit notes issued to customers for goods returned $1220

Cash received from credit customers in full settlement of debts $42230

Cash at Bank on 31 August $5100

Debit Balances on suppliers a/c at 31 August $230

Credit balances on customers accounts at 31 August $120

Required:

a) Using such of above data as is relevant,prepare a sales ledger control account and a purchases

ledger control account for the month of March

b) Explain the ways in which control accounts can be used to manage the business.

QUESTION 2

The following transactions relate to the sales ledger for the year ended 30 April 2010;

Balances on the sales ledger on 01 May 2009 $19 340

Sales $188 216

Receipt on customers $150 750

Discount allowed $4 800

The total of the balances within the ledger at 30 April 2010;

Debit balance $57 006

Credit Balances $300

Investigations reviewed the following;

1. Bad debts written off totaled $25 000,although correct entries have been made in the

personal account.No entry had been made in the personal account,no entry had been

made in the control account

2. A cheque received from P Tony for $240 had been pisted mistakenly to the cash sales

inthe General ledger instead of his personal account in the debtors ledger

3. Debts settled by set off against creditors totaled $840

4. A cheque for$4000 from Brown had been returned by the bank because he had

insufficient funds available in his account to meet the cheque.No record of this had

been made when compiling the control accounts,although Brown’s personal account in

the sales ledger ha been adjusted.

5. Goods to the value of $1600 had been returned by the customer,but no record of his

had been made

6. A credit balance of $200 had been omitted form the list of balances extracted at year

end

7. The total of the sales shown in the sales day book had been recorded as $5900 instead

of $9500

Required:

a) Prepare the sales ledger control account

b) Prepare a statement showing the reconciliation of the original total of the sales ledger balances

with the revised control account balances.

N.B

Reconciliation of control a/c balances to ledger balances

1. The control a/c balance will need to be adjusted where;

An entry recorded in the books of prime entry and correctly posted to the personal a/c,

but not in the control a/c

Where a transaction recorded in the books of prime entry,correctly posted to the

personal account,but incorrectly in the control a/c

When an item is completely omitted from the books

2. Ammendment of ledger balances

Where a transaction has been correctly recorded in the control a/c but

incorrectly in the personal a/c

Where a ledger balance has been omitted

Where a personal a/c balance is incorrectly balanced

Where personal a/c balance is omitted from the list of balances

Where a debit balance is listed as a credit balance or vice versa

QUESTION 3

The net balance extracted from T ltd purchases ledger on 31 March 2010 amounted to $12 560,which

did not agree with the balance on the purchases ledger control a/c.An audit reviewed the following

errors;

1. A debit balance of $40 in the purchases ledger had been listed as a credit balance

2. Hector had been debited for goods returned to him for $90 and no other entry had been made

3. The purchases day book had been overcast by $100

4. Credit balance on the purchases ledger amounting to $480 and a debit balance amounting to$24

had been omitted from the list of balances

5. A payment of $8 to T ltd for cash purchases of goods had been recoreded in the petty cashbook

and posted to his personal a/c in the purchases ledger,no other entry had been made.

6. The transfer of $120 from Harrows a/c in the sales ledger to the credit of his account in the

purchases legder had not been entered inhe control a/c.

Required;

a) A statement reconciling the original net balances from the purchases ledger with the corrected

balance on the purchases ledger control account

b) The purchases ledger control a/c showing the balance before correction of the errors and

necessary adjustments thereon

QUESTION 4

Allan was in the process of balancing his sales ledger at his a/c year end.The following balances were

extracted from his books;

Sales ledger control a/c debit balance $14 400

Sales ledger debit balances $13 650

Subsequently the following items requiring adjustments weer discovered;

1. A trade debtor A Gale paid $660 on his account.This amount was correctly entered in the cash

book,but was debited to A Gale’s a/c as $600

2. Credit sales for $2009 to John were correctly charged to his a/c but omitted from the sales day

book

3. Goods returnrd by a customer for $89 had been correctly entered in the debtors a/c,but entered

in the returns outwards book as $98

4. The debit balance of a trade debtor/c of $4500 had been set off against his balance in the

purchases ledger.No adjustments had been made of this in the sales ledger control a/c

5. The total of the discount allowed column inhe cashbook had been overcast by $99

Required;

a) The sales ledger control a/c showing clearly the oriina balances

b) The total if he sales ledger balance after adjustments of the above errors have been made

c) Journal entries for 1-3 above.narratives are required

QUESTION 5

2010-Jan 2 Gororo a wholesaler started business with a sum of $100 000 which he used

to open a business bank account

2010-Jan 4 Paid shop rent by cheque $3 000

2010-Jan 5 Transferred $20 000 from bank for office use

2010-Jan 6 Bought goods for resale and paid $10 000 cash

2010-Jan 7 Bought trade stock on credit from UBM $30 000 and from J&F $40 000

2010-Jan 10 Returned damaged goods to J&F worth $8 000

2010-Jan 11 Sold stock for cash $30 000

2010-Jan 12 Sold goods on credit to Batanai $25 000 and Shungu $16 000

2010-Jan 14 Bought delivery van for $35 000 on credit from Ford Motors

2010-Jan 15 Paid wages of $2 000 cash

2010-Jan 15 Bought office furniture on credit for $9 000 from Trident

2010-Jan 16 Paid insurance by cheque $5 000

2010-Jan 17 Batanai returned surplus goods and was given a credit note for $5 000

2010-Jan 18 Bought a cash register and paid by cheque $12 000

2010-Jan 20 Sold goods for $25 000 cash

2010-Jan 21 Paid UBM by cheque and received a discount of $2 000

2010-Jan 22 Gororo withdrew $4 000 cash for his own use

2010-Jan 23 Batanai paid $18 000 by cheque in full settlement of his account

2010-Jan 24 Bought stationery and paid cash $3 000

2010-Jan 25 Made part-payment of $20 000 in cash to J&F

2010-Jan 26 Shungu paid $15 000 cash and was allowed a discount of $1 000

2010-Jan 27 Purchased goods on credit: $35 000 from UBM and $28 000 form J&F

2010-Jan 27 Sold goods for cash $20 000 and immediately deposited half the amount

2010-Jan 28 Sold stock on credit to Shungu for $27 000 and to Batanai for $20 000

2010-Jan 29 Paid cash for the following expenses: $3 000 for telephone bills, $1 000 for

postages $2 000 for sundries and $2 000 for wages

2010-Jan 29 Returned surplus goods to J&F and sent them a debit note for $3 000

2010-Jan 30 Shungu returned damaged goods and received a credit note for $2 000

2010-Jan 30 Received a Loan of $20 000 form Barclays Bank

2010-Jan 30 Gororo withdrew goods costing $6 000 for private use.

2010-Jan 31 Paid by cheque $20 000 to Ford Motors and $9 000 to Trident

2010-Jan 31 Bought stock for resale and paid $10 000 cash

2010-Jan 31 Transferred $20 000 in cash and deposited it into the bank

Additional information:

A stock-take on 31 January 2010 revealed that $19 000 worth of stock remained unsold.

Required:

a) Enter the above transactions in the books of Gororo and post to the appropriate ledgers.

b) Prepare a Trial Balance as at 31 January 2010 .