control accounts activities
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Purposes of control accounts
1. To act as a check on the accuracy of the totals of the balances in the sales and purchases ledgers.
2. To provide totals of debtors and creditors quickly when a trial balance is being prepared.
3. To identify the ledger(s) in which errors have been made when there is a difference on the trial balance.
4.
To act as an internal check on the work of the sales and purchases ledger clerks – to detect errors and deter fraud, underthe charge of a responsible person
The format of sales ledger control account
Balances b/d(large amount) ———– Balances b/d(small amount) ———–
Credit sales ———— Cash/cheque from debtors ————
Returned cheque discount allowed ————
(unpaid cheque) ———- Sales returns ———–
Interest charged to debtors ———- Bad debts written off ———–
Cash refunds to customers ———–
Balances c/d(small amount) ———- Set off or contra entries ————
Balances c/d(large amount) ————
xxxxxxx xxxxxxx
Balances b/d (large amount) ———- Balances b/d (small amount) ———-
Sources of information for items appearingin the sales ledger control account
1. Credit sales- sales day book – total.
2. Returned cheques (unpaid cheques) – cash book - payments side/ bank statement.
3. Interest charged to debtors- Interest received account.
4. Cash or cheques from debtors – cash book-receipts side.
5.
Discount allowed – cash book (debit side) or discount allowed account.6. Sales returns – sales returns day book total.
7. Bad debts written off – general journal or bad debts account.
8. Set off or contra entries- general journal.
Format of purchase ledger control account
Balances b/d (small amount) ——— Balances b/d (large amount) ———
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Cash /cheques paid to creditors ——— Credit purchases ———
Discount received ——— Interest charged by Creditors ———
Purchases returns ——– Balances c/d (small amount) ———
Set off /contra entries ——– Refunds from suppliers ———
Balances c/d (large amount) ——–
xxxxx xxxxxx
Balances b/d (small amount) ——– Balances b/d (large amount) ——–
Sources of information for items appearing in the purchases ledger control account
a Credit purchases – purchases day book total
b. Interest charged by creditors – interest paid account.
c. Cash/cheque paid to creditors – cash book – payments side.
d. Discount received – cash book payment side or discount received account
e. Purchases returns – purchases returns day book total.
f. Set off or contra entries – general journal.
Set off / contra entries. Sometimes, the same person may be a debtor as well
as a creditor for the business. At the end of the month, the smaller amount inhis account from one ledger is transferred to his account in the ledger with
large amount. The entry passed for recording this transfer is known as set off or
contra entry.
Key Points
Control accounts are considered as total accounts.
Debtors ledger control account is also known as sales ledger control account or total debtors account.
Creditor’s ledger control account is also known as purchases ledger control account or total creditors account.
Balance in sales ledger control account is the balance of debtors at the year end and balance in purchases ledger control
account is balance of creditors.
Cash sales and cash purchases are not recorded in the control accounts.
The double entry to record set off from purchase ledger to sales ledger is to debit purchase ledger control account and
credit sales ledger control account.
Dishonoured cheque which was received from debtors is shown in the debit side of the sales ledger control account. Interest on overdue accounts charged from customers and refunds to customers for overpayments by them are shown
on the debit side of sales ledger control account.
Interest charged by suppliers and refunds received from suppliers for overpayments to them are recorded in the credit
side of purchases ledger control account.
Provision for bad debts is not included in sales ledger control account
Small balance in a control account represents advance payments, overpayments etc.
MCQ
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1. What is the source of information for credit sales for preparing the control accounts?
1. Sales account in the General ledger
2. Sales journal C. General journal D. Sales ledger
2. Which of the following is not considered while preparing the sales ledger control account?
A. Opening balance of debtors B. Discount received
C. Discount allowed D. Returns inwards
3. Which item will appear on the debit side of a debtors ledger control account?
A. Cash sales B. Cheques received
C. Return inwards D. Sales on credit
4. Which item will appear on the credit side of a purchase ledger control account?
A. Cheques paid B. Discount received
C. Credit purchases D. purchases returns
5. What is the purpose of preparing the control accounts?
A. To calculate the total sales B. To calculate the closing debtors only
C. To calculate the closing creditors only
D. To check the arithmetical accuracy of each ledger separately.
6. What is the alternative name of the sales ledger control account?
A. Total debtors account B. Total creditors account
C. Purchases account D. sales account.
7. Cash is refunded to customer, who had overpaid his account. In which ledger control account
it is recorded?
1. Debit side of sales ledger control account.
2. Credit side of sales ledger control account.
3. Debit side of purchase ledger control account.
4. Credit side of purchase ledger control account.
8. A refund was received from a supplier for excess payment made by us.
Where should it be recorded?
A. Debit side of sales ledger control account.
B. Credit side of sales ledger control account.
C. Debit side of purchase ledger control account.
D. Credit side of purchase ledger control account.
9. A purchase ledger control account is prepared from the following list of items:-
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Total creditors at the start of the month $ 900
Credit purchases $ 12000
Customers’ debts written off $ 200
Cash paid to creditors $ 11800
Returns inwards $ 300
What is the closing balance?
A. $ 600 B. $900 C. $ 1100 D. 1400
10. The table shows details of sales ledger:-
Sales ledger opening balance $ 1894
Total credit sales $ 10290
Cheques received from customers $ 7284
Cash received form customers $ 1236
Returns inwards $ 296
What is the closing balance of debtors?
A. $ 3664 B.$ 3072 C. $ 3368 D. $ 2664
Assignment questions
Q 1. The following details are available from the books of Weston for the month of May,
2003.Prepare Sales ledger control account and Purchases ledger control account. $
Opening debtors 4 000
Opening creditors 3 800
Cash received from debtors 8 000
Cheques received from debtors 60 000
Cheques paid to creditors 55 000
Cash paid to creditors 7 000
Bad debts written off during the year 750
Discount allowed 1 250
Discount received 1 000
Returns inwards 800
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Returns outwards 500
Transfer from purchases ledger to sales ledger 500
Credit sales 80 000
Credit purchases 71 000
Q 2. From the following information
prepare the sales ledger control accountand purchases ledger controlaccount.
$Opening debtors 12 000
Opening creditors 8 000
Credit sales 30 000
Credit purchases 25 000
Returns inwards 500
Returns outwards 800
Discounts allowed 1 000
Discounts received 300
Bad debts written off 200
Cash paid to creditors 2 500
Cheques paid to creditors 20 000
Cheques received from debtors 25 000
Cash received from debtors 4 500
Customers cheques returned unpaid 1 000
Set off from sales ledger to purchases ledger 600
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Q3. The following details are available from the books of Mathews for the month of June, 2003.
Prepare the sales ledger control account and purchases ledger control account for the month of
June, 2003. $
Sales ledger control account balance b/d 10 000
Purchases ledger control account balance b/d 8 000
Purchases for the month 12 000
Sales for the month 16 000
Returns inwards 1 000
Returns outwards 400
Payments to creditors 11 000
Receipts from debtors 15 000
Customers’ cheques returned unpaid 500
Bad debts written off 300
Discount received 550
Discount allowed 750
Transfer from purchases ledger to sales ledger 600
Credit balance in sales ledger control account 600
Debit balance in purchases ledger control account 200
Q4. The following information was obtained from the books of Vale. $
March 1 Debtors 9 506
Creditors 2 580
March 31 Credit sales 20 345
Credit purchases at list price 7 200
Returns outwards at list price 200
Sales returns 120
Cash and cheques received from debtors 19 580
Customers’ cheques dishonored 250
Cash and cheques paid to suppliers 5 170
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Discount received 190
Discount allowed 210
Interest charged to customers on overdue accounts 70
Bad debts written off 155
Balance in sales ledger set off against balance in the
purchases ledger 350
Cash refunds from suppliers for overpayments 60
Debit balances in purchases ledger 40
Credit balances in sales ledger 64
All purchases and purchases returns were subject to a trade discount of 10% off the list price.
Prepare the sales ledger control account and purchases ledger control account.
Q 5. The following information was obtained from the books of K. Kent:- $
1st April, 2002 Trade debtors 28
518 Trade
creditors 7 740
Stock in trade 22 500
31st March, 2003: Credit sales 61 440
Credit purchases at list price 21 600
Purchase returns at list price 600
Sales returns 360
Cash and cheque received from debtors 58 740
Customer’s cheque dishonored 750
Cash and cheque paid to creditors 15 510
Discount received 570
Discount allowed 630
Interest charged to customers on overdue accounts 210
Bad debts written off 465
Balance in sales ledger set off against balance in
purchases ledger 1050
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Cash refunds from suppliers for overpayments 180
Debit balance in purchases ledger 120
Credit balance in sales ledger 186
Interest charged by our suppliers on overdue accounts 390
Cash refunds to customers for overpayments by them 540
All purchases and purchase returns are subject to a trade discount of 20% off the list price. during the year Cash sales
were $ 22 000 and Cash purchases were $ 12 500.
On 31st March, 2003 the stock in trade was valued at $ 12 500.
Required to:-
1. Prepare the sales ledger control account and purchases ledger control account.
2. Calculate the gross profit of the business for the year ended 31st March,2003.
Q 6. The following information is relating to the business of Anson for the month ended31st March 2003:-
Credit sales and return inwards are subject to 10% trade discount on list price.
1st March 2003 Debtors 4,000
Creditors 2,000
31 March Credit sales at list price 2,00,00
Cash sales 5,000
Returns inwards at list price 1,500
Credit purchases 12,000Discount allowed 1,500
Discount received 1,400
Customer’s cheque returned by bank with remarks of
―insufficient funds‖
900
Interest charged on overdue debts 250
Return outwards 750
Cheques paid to suppliers 7,000
Cheques and cash received from credit customers 15,000
Credit balance in sales ledger 300
Bad debts written off 600
Required:-
1. Make sales ledger control accounts of Mr. Ibrahim for the month of March 2003.
2. Calculate total Turn over on 31st March 2003
Q 7. The following information was obtained from the books of K. Vasanthi.
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$
1st April 2003 Trade debtors 19,012
Trade creditors 5,160
Stock in trade 15,000
31st March 2004 Credit sales 40,690
Credit purchase at list price* 14,400
Purchase return at list price* 400
Sales return 240
Cash and cheque received from debtors 39,160
Customers cheque dishonored 500
Cash and cheque paid to suppliers 10,340
Discount received 380
Discount allowed 420
Interest charged to customers on Overdue accounts 140
Bad debts written off 310
Balance in the sales ledger set off against balance in the
purchase ledger 700
Cash refunds from suppliers for over payments 120
Debit balance in purchase ledger 80
Credit balance in sales ledger 124
Overdue interest charged by our suppliers 260
Cash refunds for over payments made by customers 360
*All purchases and purchase returns were subject to a trade discount of 20%off the list price.
During the year cash sales were $ 22 000 and cash purchase were $ 12,500.
*On 31st March 2004 the stock in trade was valued at $ 12,500.
Required:-
1. Total Debtors Account for the year ended 31st March 2004
2. Total Creditors Account for the year ended 31 st March 2004.
3. c. Calculate the Gross profit of the business for the year ended 31st march 2004.
Q 8. The following details are available from the books of a business for the year ended
31st December 2002:- $
On 1-1-2000 The balance in the provision for bad debts account $ 400
On 31-12-2000 Total debtors $12 000
On 1-1-2002 Purchase ledger control account balance $ 12 700
On 1-1-2002 Sales ledger control account balance $ 14 200
On 31-12-2002:
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Cheque issued to suppliers $ 19,200
Cheque received from customers $ 50,400
Discount allowed $ 400
Discount received $ 600
Returns inwards $ 1 000
Return outwards $ 900
Bad debts written off $ 1 200
Dishonored cheque returned to us $ 1 200
Credit sales $ 52 000
Credit purchases $ 28 000
Set off from purchase ledger to the sales ledger $ 2 000
5% of year end debtors should be created as provision for bad debts
Required to prepare:-
a. Purchase ledger control account for the year ended 31 st December 2002
b.Prepare the sales ledger control account for the year ended 31 st Dec 2002.
c.The provision for bad debts a/ct and the balance sheet extracts for the 3 years ended 31st Dec
2000,2001 and 2002.
Q 9. The following details are available from the books of a business for the year ended
31st December 2002:- $
On 1-1-2000 The balance in the provision for bad debts account $ 400
On 31-12-2000 total debtors $12 000
On 1-1-2002 Purchase ledger control account balance $ 12 700
On 1-1-2002 Sales ledger control account balance $ 14 200
On 31-12-2002:
Cheque issued to suppliers $ 19,200
Cheque received from customers $ 50,400
Discount allowed $ 400
Discount received $ 600
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Returns inwards $ 1 000
Return outwards $ 900
Bad debts written off $ 1 200
Dishonored cheque returned to us $ 1 200
Credit sales $ 52 000
Credit purchases $ 28 000
Set off from purchase ledger to the sales ledger $ 2 000
5% of year end debtors should be created as provision for bad debts
Required to prepare:-
1. Purchase ledger control account for the year ended 31 st December 2002
2. Prepare the sales ledger control account for the month ended 31 st Dec 2002.
Q 10. Ander Paul, a sole trader, provided the following information from his accounts for the
year ended 31st Dec 2003.
$
Credit sales for 2003 75 500
Credit purchases for 2003 68 900
Credit sales return for 2003 700
Total debtors at 1 Jan 03 8 500
Total creditors at 1 Jan 03 4 800
Prov. for bad debts as at 1 Jan 01 600
Discount Cash Bank Discount Cash Bank
Sales
Debtors 4 000
9 000 1 000
60 000
Debtors
(dishonored
Cheque)
Purchase
Creditors1 800
1 500
5 000
600
40 000
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The cash book extract figures are totals for the year.
The following points are also relevant.
1. $ 600 of trade debtors were written off as bad debts on 7th Oct 2003
2. A revised provision for bad debts is to be 5%of the trade debtor’s balance as at 31st Dec 2001.
3. Balance in the sales ledger set off against balance in the purchase ledger $ 300.
Required to prepare the Sales ledger control account and the provision for bad debt account for
the year ended 31st Dec 2003.
Q. Give two reasons for keeping control accounts. Or Identify two advantages of
preparing control account.
v Control account helps to eliminate unnecessarily detailed information from the general
ledger.
v Control account make possible the preparation of trial balance without referring to the
subsidiary ledgers.
v Enables the counter-checking of sales ledger and purchases ledger individual balances.
v To check the accuracy of postings in the ledger.
v Provides easy reference for information.
v Localize errors.
v Enable the general ledger to be self-balanced.
FORMATS:
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