Name : Chapter 5 Control accounts (統制帳戶proxy.flss.edu.hk/~flssmcwong/S5 Notes/Chapter 5 Control accounts.pdf · receivable ledger control account, non-trade debtors ... Dr

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Chapter 5 Control accounts (統制帳戶) 5.1 Introduction A control accounts can help us detect errors in the accounting receivable ledger (debtors, sales ledger) and accounts payable ledger (creditors, purchases ledger) (統制帳戶幫助檢測應收帳及應付帳中的錯誤).

5.2 Preparation of the accounts receivable ledger control account (編製應收帳統制帳戶) A trading business commenced operations on 1 July 2010 and record the following transactions:

Jul 2 Sold goods on credit to J Chan for $4,000.

" 6 Sold goods on credit to H Mok for $3,000.

" 10 J Chan returned goods of $400.

" 18 H Mok returned goods of $600.

" 22 J Chan paid $3,200 by cheque after deducting a $400 discount.

" 24 Sold goods on credit to B Leung for $6,000.

" 28 H Mok paid $2,200 by cheque after deducting a $200 discount.

" 30 Sold goods on credit to H Mok for $2,000.

1 Record the transaction in the books of original entry (把交易記錄在原始分錄簿內)

Sales Journal

Date Details Amount

2010 $

Jul 2 J Chan 4,000

" 6 H Mok 3,000

" 24 B Leung 6,000

" 30 H Mok 2,000

" 31 Total credit sales for the month 15,000

Returns Inwards Journal

Date Details Amount

2010 $

Jul 10 J Chan 400

" 18 H Mok 600

" 31 Total returns inwsards for the month 1,000

Cash Book

Date Details Discount Bank Date Details Discount Bank

2010 $ $ 2009 $ $

Jul 22 J Chan 400 3,200

" 28 H Mok 200 2,200 2 Post the entries from the books of original entry to the debtors’ accounts (把原始分錄簿的記錄過帳到

應收帳的債務人帳戶內)

Accounts Receivable Ledger (應收帳) J Chan

2010 $ 2010 $

Jul 2 Sales 4,000 Jul 10 Returns inwards 400

“ 22 Bank 3,200

“ 22 Discounts allowed 400

4,000 4,000

H Mok 2010 $ 2010 $

Jul 6 Sales 3,000 Jul 18 Returns inwards 600

“ 30 Sales 2,000 “ 28 Bank 2,200


“ 31 Balance c/d 2,000

5,000 5,000

B Leung 2010 $ 2010 $

Jul 24 Sales 6,000 Jul 31 Balance c/d 6,000

Name : _________________

Serial No: _____

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3 List the debtor’s balances in the accounts receivable ledger (Sales ledger) (列示應收帳內所有債務人的

餘額) List of Balances in the Accounts Receivable Ledger as at 31 July 2010

$ H Mok 2,000 B Leung 6,000 Total of debtors’ balances (debit) 8,000

4 Put (a) the monthly totals of transactions that are related to trade debtors from the books of original entry (sales journal, returns inwards journal, cash book, etc) and (把該月各類關於債務人的交

易總和及)

(b) the debtors’ balances from the accounts receivable ledger into a control account (應收帳內債

務人的餘額總和記入統制帳戶) The entries for accounts receivable ledger control (debtors control, sales ledger control) is the same as accounts receivable ledger (統制帳戶的記帳與應收帳是相同的).

Accounts Receivable Ledger Control

2010 $ 2010 $

Jul 31 Sales 15,000 Jul 31 Returns inwards 1,000

“ 31 Bank 5,400



15,000 15,000

Sometime, we don’t need to put the date in the ledger control account (我們不需要在統制帳戶內記錄日期) in the examination

so the above accounts receivable ledger control will be shown as follow:


$ $

Sales 15,000 Returns inwards 1,000

Bank 5,400

Discounts allowed 600

Balance c/d 8,000

15,000 15,000

5 Check whether the debit and credit totals of the control accounts agree (檢查統制帳戶內的借方與貸

方總和是否相等) If the debit and credit totals of the control account do not agree (如果統制帳戶內的借方與貸方總和不相等), errors must have

been made in the books or ledgers (應收帳或原始分錄簿內必有錯誤). Class work 1

Draw up an accounts receivable ledger control account from the following:

2009 $

Mar 1 Accounts receivable ledger balance (debit) 12,490

Totals for the month of March:

Sales jounral 24,610

Returns inwards journal 1,120

Cash book: Cheques and cash received from debtors 16,380

" 31 Accounts receivable ledger balances (debit) 19,600


2009 $ 2009 $

Mar 1 Balance b/d 12,490 Mar 31 Returns inwards 1,120

“ 31 Sales 24,610 “ 31 Cash and bank 16,380

“ 31 Balance c/d 19,600

37,100 37,100

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Information sources for the accounts receivable ledger control account (應收帳統制帳戶的資料來源)

Information required Source

A Opening balances (期初餘額總和) of total trade debtors List of balance in the accounts receivable ledger (應收帳)

B Total credit sales (賒購總額) Sales journal (銷貨簿)

C Total returns inwards (購貨退出總額) Returns inwards journal (銷貨退回簿)

D Total receipts (Bank) (收取銀行存款) from trade debtors Cash book (現金簿) (bank columns on the debit side)

E Total receipts (Cash) (收取現金) from trade debtors Cash book (現金簿) (cash columns on the debit side)

F Total discounts allowed (折讓折扣總額) Cash book (現金簿) (discount column on the debit side)

G Total bad debts (壞賬總額) written off General journal (or the journal) (普通日記簿)

H Closing balances (期末餘額總和) of total trade debtors List of balance in the accounts receivable ledger (應收帳)

How information is put into the accounts receivable ledger control account

The cash book may also have included receipts from non-trade debtors (包括非購貨債權人收入). When preparing the accounts

receivable ledger control account, non-trade debtors’ transactions should be excluded (非購貨債權人交易應該排除以外). In

other words, only the trade debtors’ transactions should be shown in the accounts receivable ledger control account (只有購貨

債權人交易顯示在應收賬統制帳戶內).

Note that the bad debts recovered (壞帳收回) should be shown on the debit side of the control account because it had been

deducted (credit) in the prior period (在前一期已經扣減). Hence we need to add it back (debit) (需要加回) to show the correct

amount in the control account. Recall the entries required for the recovery of a bad debt written off in a prior period: 1 Reinstatement of the debit in the debtor’s account: Dr Debtor’s account Cr Bad debts recovered account 2 Receipt of payment from the debtor: Dr Cash/Bank account Cr Debtor’s account

Owing items Deducting items

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Class work 2

1. Prepare an accounts receivable ledger control account from the following information: Deduce the unknown total of balances

as at 31 March 2009.

2009 $

Mar 1 Accounts receivable ledger balance (debit) 6,708

Totals for the month of March:

Discounts allowed 300

Cash and cheques received from debtors 8,970

Sales journal 11,500

Bad debts written off 115

Returns inwards journal 210

" 31 Accounts receivable ledger balances (debit) ?


2009 $ 2009 $

Mar 1 Balance b/d 6,708 Mar 31 Returns inwards 210

“ 31 Sales 11,500 “ 31 Cash and Bank 8,970


“ 31 Bad debts 115


18,208 18,208

Total balance of accounts receivable ledger at 31 March 2009 = 8,613

2. The following information was extracted from a firm for the year ended 31 January 2009:

Information extracted from the accounts receivable ledger:

$

Debtors’ balances as at 1 January 2009 (debit) 18,940

Debtors’ balances as at 31 January 2009 (debit) 25,190

Information extracted from the books of original entry for January 2009:

$

Credit sales 102,900

Cheques received from debtors (including the recovery of bad debt of $800 written off in a prior period and a cheque of $2,300 received from the debtor arising from the sale of old furniture) 75,940

Cash received from debtors 12,360

Discounts allowed to debtors 6,830

Goods returned from debtors 2,960

Bad debts written off 1,660

Draw up an accounts receivable ledger control account:


2009 $ 2009 $

Jan 1 Balance b/d 18,940 Jan 31 Returns inwards 2,960

“ 31 Sales 102,900 “ 31 Bank ($75,940 $2,300) 73,640

“ 31 Bad debts recovered 800 “ 31 Cash 12,360

“ 31 Discounts allowed 6,830

“ 31 Bad debts 1,660

“ 31 Balance c/d 25,190

122,640 122,640

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5.3 Preparation of the accounts payable ledger control account (編製應付帳統制帳戶)

Information sources for the accounts payable ledger control account (應付帳統制帳戶的資料來源)

Information required Source

J Opening balances (期初餘額總和) of total trade creditors List of creditors’ balances in the accounts payable ledger

K Total credit purchases (賒購總額) Purchases journal (購貨簿)

L Total returns outwards (購貨退出總額) Returns outwards journal (購貨退出簿)

M Total payment (Bank) (銀行付款) to trade creditors Cash book (現金簿) (bank columns on the credit side)

N Total payment (Cash) (現金付款) to trade creditors Cash book (現金簿) (cash columns on the credit side)

O Total discounts received (收到折扣總額) Cash book (現金簿) (discount column on the credit side)

P Closing balances (期末餘額總和) of total trade creditors List of balance in the accounts payable ledger

The cash book may also have included payment to non-trade creditors. When preparing the accounts payable ledger control

account, non-trade creditors’ transactions should be excluded. In other words, only the trade creditors’ transactions should be

shown in the accounts payable ledger control account.

The entries for accounts payable ledger control (creditors control, purchases ledger control) is the same as accounts payable ledger (統制帳戶的記帳與應付帳是相同的). Only the trade creditors’ transactions should be shown in the accounts payable

ledger control account.

Class work 3

1. The following information was extracted from a firm for the year ended 31 January 2009:

Information extracted from the accounts payable ledger:

$

Creditors’ balances as at 1 January 2009 (credit) 38,900

Creditors’ balances as at 31 January 2009 (credit) 47,850

Information extracted from the books of original entry for January 2009:

$

Credit purchases 49,360

Cheques paid to creditors 36,200

Discounts received from creditors 3,260

Goods returned to creditors 950

paying items deducting items

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Draw up an accounts payable ledger control account:

Accounts Payable Ledger Control

2009 $ 2009 $

Jan 31 Bank 36,200 Jan 1 Balance b/d 38,900

“ 31 Discounts received 3,260 “ 31 Purchases 49,360

“ 31 Returns outwards 950

“ 31 Balance c/d 47,850

88,260 88,260

2. Draw up an accounts payable ledger control account from the following:

2009 $

May 1 Accounts payable ledger balances (credit) 19,320

Totals for the month of May:

Purchases journal 31,745

Returns outwards journal 1,220

Cheques paid to creditors 22,390

“ 31 Accounts payable ledger balances (credit) 27,455

Draw up an accounts receivable ledger control account:


2009 $ 2009 $

May 31 Returns outwards 1,220 May 1 Balance b/d 19,320

“ 31 Bank 22,390 “ 31 Purchases 31,745

“ 31 Balance c/d 27,455

51,065 51,065

3. Prepare an account payable ledger control account from the following information. As the total of balances as at 30 November

2009 is missing, you will have to deduce that figure.

2009 $

Nov 1 Accounts payable ledger balances (credit) 7,560

Totals for the month of November:

Discounts received 240

Returns outwards journal 355

Cash and cheques paid to creditors 9,850

Purchases journal 11,100

“ 30 Accounts payable ledger balances (credit) ?


2009 $ 2009 $

Nov 30 Discounts received 240 Nov 1 Balance b/d 7,560

“ 30 Returns outwards 355 “ 30 Purchases 11,100

“ 30 Cash and bank 9,850

“ 30 Balance c/d (balancing figure) 8,215

18,660 18,660

Total balance of accounts payable ledger at 30 November 2009 = 8,215

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5.4 Contra items (對銷項目) When a debtor of the firm is also a creditor (企業的某債務人同時是企業的債權人時), its balances in the accounts receivable

and accounts payable ledgers can be set off (互相抵銷) by means of a contra entry (對銷項目). For convenience, we don’t need

to make any entry in the sales and purchases journal (為了方便，我們不需要在銷貨簿及購貨簿內對銷) but we need to make

the adjustment in the debtor control and creditor control accounts (但我們需要在應收帳及應付帳統制帳戶內作出調整). This

means that contra items will affect accounts receivable, accounts payable, debtor control and creditor control accounts.

Example 1

The following transactions were made in May 2010:

1. We sold goods on credit to A Hung for $6,000 on 1 May 2010.

Accounts Receivable Ledger

A Hung

2010 $ May 1 Sales 6,000

2. We purchased goods on credit from A Hung for $8,800 on 12 May 2010.

Accounts Payable Ledger

A Hung

2010 $ May 12 Purchases 8,800

As A Hung is both a trade debtor and a trade creditor of the firm, the smaller balance ($6,000 owed by A Hung) can be set off

against the larger balance ($8,800 owed to A Hung) in the accounts receivable and accounts payable ledgers.

Suppose the contra entry was made at the end of May 2010:

Accounts Receivable Ledger

A Hung

2010 $ 2010 $ May 1 Sales 6,000 May 31 Set-off – Accounts payable ledger 6,000

Accounts Payable Ledger

A Hung

2010 $ 2010 $ May 31 Set-off – Accounts receivable ledger 6,000 May 12 Purchases 8,800


8,800 8,800

When contra entries were made in the accounts receivable and accounts payable ledgers during a period, the total amount should

be shown in the control accounts as follows:

1. The total of set-offs in the accounts receivable ledger is shown on the credit side of receivable ledger control account.


2010 $ 2010 $ May 1 Balance b/d 10,000 May 31 Returns inwards 2,000

“ 31 Sales 20,000 “ 31 Set-off – Accounts payable ledger 6,000 “ 31 Balance c/d 22,000

30,000 30,000

2. The total of set-offs in the accounts payable ledger is shown on the debit side of payable ledger control account.


2010 $ 2010 $ May 31 Returns outwards 1,000 May 1 Balance b/d 12,000

“ 31 Set-off – Accounts receivable ledger 6,000 “ 31 Purchases 22,000

“ 31 Balance c/d 27,000

34,000 34,000

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Class work 4

1. Prepare an accounts receivable ledger control account from the following information. As the total of debit balances as at 31

May 2009 is missing, you will have to deduce that figure.

2009 $ May 1 Debit balances in the accounts receivable ledger 6,420 Totals for the month of May: Sales journal 12,800 Cash and cheques received from debtors 10,370 Discounts allowed 395

Debit balances in the accounts receivable ledger set off against credit balances in the accounts payable ledger 145

“ 31 Debit balances in the accounts receivable ledger ?

Credit balances in the accounts receivable ledger 50


2009 $ 2009 $

May 1 Balance b/d 6,420 May 31 Cash and bank 10,370

“ 31 Sales 12,800 “ 31 Discounts allowed 395

“ 31 Balance c/d 50 “ 31 Set-off – Accounts payable ledger 145


19,270 19,270

2. The following information was extracted from the books of Turbo Ltd for the year ended 31 March 2009:

$ Debtors’ balances as at 1 April 2008 30,000 Creditors’ balances as at 1 April 2008 15,000 Totals for the year ended 31 March 2009:

Purchases 151,000 Discounts received 1,125 Sales 236,250 Payments to creditors 156,250 Receipts from debtors 212,875 Interest charged to debtors 225 Balances in the accounts receivable ledger set off against balances in the accounts payable ledger 2,500

(a) Write up the accounts payable ledger control account and show the balance as at 31 March 2009.


2009 $ 2008 $

Mar 31 Discounts received 1,125 Apr 1 Balance b/d 15,000

“ 31 Payments to creditors 156,250 2009

“ 31 Set-off – Accounts receivable ledger 2,500 Mar 31 Purchases 151,000

“ 31 Balance c/f 6,125

166,000 166,000

(b) Write up the accounts receivable ledger control account and show the balance as at 31 March 2009.


2008 $ 2009 $

Apr 1 Balance b/d 30,000 Mar 31 Receipts from debtors 212,875

2009 “ 31 Set-off – Accounts payable ledger 2,500

Mar 31 Sales 236,250 “ 31 Balance c/f 51,100

“ 31 Interest charged to debtors 225

266,475 266,475

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5.5 Minority balances (少數差額) The balances brought down in the accounts receivable ledger are usually debit balances (通常是借方餘額), while the balances

brought down in the accounts payable ledger are usually credit balances (通常是貸方餘額). However, this is not always the case.

There may be credit balances in the accounts receivable ledger or debit balances in the accounts payable ledger.

Example 2

The following transactions were made in July 2010:

1 We sold goods on credit to W Young for $5,000 on 6 July 2010.

2 W Young paid $5,000 by cheque on 20 July 2010.

3 W Young returned goods of $400 on 30 July 2010.

The above transactions were entered in W Young’s account as follows:

Accounts Receivable Ledger W Young

2010 $ 2010 $ Jul 6 Sales 5,000 Jul 20 Bank 5,000

“ 31 Balance c/d 400 “ 30 Returns inwards 400

5,400 5,400

Aug 1 Balance b/d 400 As a result, there was a credit balance brought down in W Young’s account. This balance would be settled once the refund was

made to W Young.

Example 3

The following transactions were made in August 2010:

1 We purchased goods on credit from S Tang for $8,000 on 8 August 2010.

2 We paid S Tang $9,000 by cheque on 26 August 2010.

The above transactions were entered in S Tang’s account as follows:

Accounts Payable Ledger S Tang

2010 $ 2010 $ Aug 26 Bank 9,000 Aug 8 Purchases 8,000


9,000 9,000

Sept 1 Balance b/d 1,000 The over-payment to S Tang would give rise to a debit balance in S Tang’s account on 1 September 2010. This balance would be

settled once the refund was received from S Tang.

As a credit balance seldom appears in the accounts receivable ledger (很少出現在應收帳), or a debit balance seldom appears in

the accounts payable ledge (很少出現在應付帳), and such a balance only exists temporarily (只是暫時存在), we call it a minority

balance (少數差額).

The total of minority balances in the accounts receivable and accounts payable ledgers should be shown separately in the control

accounts (應該獨立列示在統制帳戶). They should not be netted off with the other normal balances in the ledgers (他們不應該

與其他正常結餘對銷).

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Example 4

Information extracted from the accounts receivable ledger as at 1 September 2010:

$

Debit balances 38,160

Credit balances 370

Information extracted from the books of original entry for September 2010:

$

Cash received from debtors 1,040

Cheques received from debtors 62,390

Credit sales 70,900

Bad debts written off 3,060

Discounts allowed 2,980

Returns inwards 1,640

Cash refunded to a customer who had overpaid 370

Dishonoured cheques 290

Interest charged on an overdue account 500

Information extracted from the accounts receivable ledger as at 30 September 2010:

$

Debit balances 39,140

Credit balances 400

Accounts Receivable Ledger Control 2010 $ 2010 $ Sept 1 Balance b/d 38,160 Sept 1 Balance b/d 370

“ 30 Sales 70,900 “ 30 Cash 1,040 “ 30 Cash Refund 370 “ 30 Bank 62,390

“ 30 Bank – Dishonoured cheques 290 “ 30 Bad debts 3,060 “ 30 Interest received 500 “ 30 Discounts allowed 2,980 “ 30 Minority balance c/d 400 “ 30 Returns inwards 1,640

“ 30 Balance c/d 39,140

110,620 110,620

Cash – Refund (現金退款): When money is paid for Cash – Refund, the cash book should be credited and the relevant debtor

account should be debited.

Dishourned cheques (不兌現支票): The cash book (bank) should be credited and the trade debtor in the account receivable

ledger should be debited.

Interest received (已收利息): interest received is one kind of revenue so the revenue account should be credited and the

relevant debtor account should be debited.

The minority balances ($370 opening and $400 closing) should not be netted off with the normal balances ($38,160 opening and

$39,140 closing).

Accounts Receivable Ledger Control 2010 $ 2010 $ Sept 1 Balance b/d ($38,160 $370) 37,790 Sept 30 Cash 1,040

“ 30 Sales 70,900 “ 30 Bank 62,390 “ 30 Cash Refund 370 “ 30 Bad debts 3,060

“ 30 Bank – Dishonoured cheques 290 “ 30 Discounts allowed 2,980 “ 30 Interest received 500 “ 30 Returns inwards 1,640 “ 30 Balance c/d ($39,140 $400) 38,740

109,850 109,850

The reason for refund in debit side of Debtors:

Firstly, we enter the returns inwards in the credit side because we need to deduct the returns

inwards in the debtors account. However, part of returns inwards is refund so we need to add

back the amount of returns inwards to settle the deducting amount. Hence we debit the refund in

debit side of Debtors. This is the oppose side of Cash account.

1. 點解有時 cr. 同 dr. 兩邊都有 b/f ? 兩邊 o 既 balance 係咩意思?

SLCA 同 PLCA 有時都會兩邊都有 bal b/d

SLCA 正常情況下系 debit bal.

PLCA 正常情況下 credit bal.

當 SLCA 有 debit bal 時,即是 minority bal.原因可能是:我地賣貨物比人,人地還曬貨物錢比我地,但還錢后可能會有退貨.甘即系我地欠人地的錢了.

同樣道理.PLCA 都會有 minority bal.

一個最簡單分辨邊個系 minority bal 的方法是:bal 數小的就是 minority bal....ok?

2.cash refund to debtor 點解入落去 dr. side? 乜唔係入落 cr.咩, 因為 debtors 爭公司 o 既錢少左

2..簡單方法---一見到我地比錢人地,就 credit:bank/cash 先.因為一定系出錢比人地啊...甘你就可以慢慢想究竟 debit 翻邊個帳戶啦.

呢個方法就唔會亂羅^^

3. trade discount 即係咩 discount?

3.trade discount 系買貨時人地比 ge 折扣,呢個通常唔使理.

cash discount 系鼓勵人地早點還錢給我.給的折扣.eg:你本來欠我 10 文,限期系後日還,但我等錢使,要你聽日就還比我先,甘我可以收你 8 文,當中果 2 文

就系 cash discount 啦

做 SLCA 好多時會遇到呢幾個 discount

discount allowed .discount received .trade discount discount allowed 要入 SLCA credit side

discount received 入 PLCA debit side

4.Allowances to customers 洗唔洗計落 sales ledger control?如果要, 入邊個 side?

4.Allowances 要入 SLCA.入 SLCA credit side

呢個情況可能系:我地賣貨比人.可能運送比人的路途中會有所損壞,

為咗唔好比人地退貨,我地會比個 dicount 區地.等區地比少 d 錢,要咗件貨....甘我地的應收賬款會減少,so 要 credit SLCA

5. Debit balance in sales ledger transferred to purchases ledger as per contra 係點解?應該點做?

5.呢個系 set-off

呢個情況系,有時我地的供應商又會系我地 ge 客人

例子就系:我問你買咗條牛仔褲.$100

你向我買咗見衫,$80

甘我地會系個帳戶度對銷,credit SLCA $80.debit PLCA $80

剩下的 20 文先會比錢...

Refund received from supplier 因為供應商退回部份自己公司所付的費用, 所以就會把退回的金額 Credit 在 Creditors Control Account.你可以分兩階段

理解

(a) 最初我們付款給 creditor $1,300

Dr. Creditor... $1,300 Cr Bank...... $1,300 (b) 但後來發現因各種原因 Creditor 要退款, 例如我們在 (a) 上多付了$300, 所以供應商退還多我們多付的 entries 就

是

Dr. Bank ..... $300 Cr. Creditor ..$300

Additional sales

Reverse of receiving cheque

Reverse of receiving cash

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HKDSE (Sample, 2) (Control) An inexperienced accounts clerk of Silver Moon Company has drafted the following sales ledger control account for December 20X6:

$ $ Balance brought forward 46,980 Cash and cheques received 310,650 Credit sales 408,530 Discounts allowed 23,027 Cash sales 60,800 Allowance for doubtful debts 6,000 Set off with purchases ledger control 18,410 Allowance to customer for slightly damaged goods 19,100 Returns inwards 28,070 Balance carried forward 204,013

562,790 562,790

After investigation, the following errors were discovered. (i) Bad debts of $30,130, written off in July 20X6, had been omitted in the control account.

(ii) A customer, who had fully settled his account in November 20X6, returned unsatisfactory goods amounting to $8,000 in

December 20X6. The amount was correctly recorded in the returns inwards account but not in the sales ledger. (iii) Discounts allowed had been correctly entered in the customers’ accounts in the sales ledger but had been overcast by $900 in

the discount column of the cash book. REQUIRED: (a) Rewrite the sales ledger control account. (b) Describe how credit balances in the sales ledger should be shown in the statement of financial position.

(a)

Sales ledger control

$ $

Balance brought forward 46,980 Set off with purchases ledger control 18,410

Credit sales 408,530 Returns inwards 28,070

Minority balance c/f (ii) 8,000 Cash and cheques received 310,650

Discounts allowed ($23,027 $900) (iii) 22,127

Allowance to customer 19,100

Bad debts written off (i) 30,130

Balance c/f 35,023

463,510 463,510

(b) The total of the credit balance in the sales ledger should be shown in the statement of financial position under

the category of ‘current liabilities’ as accounts payables.

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Class work 5

The following information appeared in the books of Peking Co for the month of October 2010:

Balances as at 1 October 2010:

Dr Cr $ $ Accounts receivable ledger 69,520 1,070 Accounts payable ledger 920 42,150

Totals for the month of October 2010:

$ Sales journal 155,800 Discounts received 3,200 Bad debts written off 4,510 Returns to suppliers 34,870 Carriage outwards 2,150 Cash and cheque received from trade debtors 146,500 Dishonoured cheques from trade debtors 18,600 Credit purchases 151,200 Cash sales 50,000 Trade discounts received 950 Cash and cheques paid to trade creditors 99,900 Debit balances in accounts receivable ledger set off against credit balances in the accounts payable ledger 6,500 Allowance for doubtful accounts 9,196 Discounts allowed 2,500 Cash refunds to trade debtors 4,720

Balances as at 31 October 2010:

Dr Cr $ $ Accounts receivable ledger 91,960 4,470 Accounts payable ledger 7,690 55,650

Required:

Prepare the Accounts receivable ledger control account and Accounts payable ledger control account.

Answer:


2010 $ 2010 $

Oct 1 Balance b/d 69,520 Oct 1 Balance b/d 1,070

“ 31 Sales 155,800 “ 31 Bad debts 4,510

“ 31 Bank – Dishonoured cheques 18,600 “ 31 Cash and bank 146,500

“ 31 Cash - Refund 4,720 “ 31 Set-off – Accounts payable ledger 6,500

“ 31 Minority balance c/d 4,470 “ 31 Discounts allowed 2,500

“ 31 Balance c/d 91,960

253,040 253,040


2010 $ 2010 $

Oct 1 Balance b/d 920 Oct 1 Balance b/d 42,150


“ 31 Returns outwards 34,870 “ 31 Minority balance c/d 7,690

“ 31 Cash and bank 99,900

“ 31 Set-off – Accounts receivable ledger 6,500

“ 31 Balance c/d 55,650

201,040 201,040

13

5.6 Self-balancing control accounts (自行平衡統制帳戶) Instead of extracting the balances from the ledger, we would simply let the control account balance itself (讓統制帳戶自行平衡)

and generate its own balances (得出本身的餘額). This type of control account is called the self-balancing control account (自行

平衡統制帳戶). This type of control account is more common in examinations. If the balance of a control account does not agree

with that of its corresponding ledger, errors must have been made in the books or ledgers (如果統制帳戶的餘額與相關分類帳

的餘額不相等這表示帳簿內有地方出了錯).

Accounts Receivable Ledger Control 2010 $ 2010 $ Jul 31 Sales 15,000 Jul 31 Returns inwards 1,000

“ 31 Bank 5,400 “ 31 Discounts allowed 600 “ 31 Balance c/d (balancing figure) 8,000

15,000 15,000

Since the balance of control account is generated by itself but not extract from the balances of the account receivable/account payable ledger, the errors affecting the accounts receivable/payable ledger only do not affect the balance in the control account. (由於統制帳戶餘額自行平衡產生，並不是由應收賬款/應付帳款的餘額提取，所以應收/應付帳的錯誤不會影響統制帳戶餘

額)

Class work 6

Kelly Chow has presented the following information for the month ended 31 October 2010:

Accounts receivable ledger: Oct 1 Debit balances $10,320 Credit balances $3,480 Oct 31 Debit balances $12,000 Credit balance $144

Totals for the month of October 2010: Credit sales $14,052 Cash sales $6,828 Cash received from trade debtors $8,580 Allowance for doubtful accounts $372 Discounts allowed $1,452 Discounts received $876 Returns inwards $192 Bad debts written off $564

On 1 October 2010, the balances in the accounts receivable ledger control account agreed with the balances in the accounts receivable ledger. On 31 October 2010, the credit balance in the accounts receivable ledger control account also agreed with the credit balance in the accounts receivable ledger. (a) Draw up an accounts receivable ledger control account. (b) Did the debit balance in the accounts receivable ledger control account agree with the debit balance in the accounts

receivable ledger on 31 October 2010? If not, calculate the difference between the two balances.

Answer: (a)


2010 $ 2010 $

Oct 1 Balance b/d 10,320 Oct 1 Balance b/d 3,480

“ 31 Sales 14,052 “ 31 Cash 8,580

“ 31 Minority balance c/d 144 “ 31 Discounts allowed 1,452

“ 31 Returns inwards 192

“ 31 Bad debts 564

“ 31 Balance c/d (balancing figure) 10,248

24,516 24,516

(b) No, the two debit balances did not agree. The difference between the two balance was $1,752 ($12,000

$10,248).

14

5.7 Errors affecting the agreement of balances of a control account and its corresponding ledger (導致統制帳戶與相關分類帳的餘額不相等的錯誤)

1 A casting error in a book of original entry (原始分錄簿加總出錯) (no error in the ledger) Suppose the monthly total of the sales journal was overcast as follows (while the other entries were correctly made):

Sales Journal Date Details Amount

2010 $

Jul 2 J Chan 4,000

" 6 H Mok 3,000

" 24 B Leung 6,000

" 30 H Mok 2,000

" 31 Total credit sales for the month 16,000

The debtors’ accounts in the accounts receivable ledger and the list of debtors’ balances in the accounts receivable ledger would not be affected.

List of Balances in the Accounts Receivable Ledger as at 31 July 2010 $ H Mok 2,000 B Leung 6,000 Total of debtors’ balances (debit) 8,000

However, the control account would be affected as follows:


“ 31 Banks 5,400 “ 31 Discounts allowed 600 “ 31 Balance c/d (balancing figure) 9,000 16,000 16,000

As a result, the balance of the control account would differ from the total of balances in the accounts receivable ledger. Since the errors are mainly in sales journal and the control account, the corrections required is in the control account. No error in the accounts receivable ledger so no adjustment is needed in the accounts receivable ledger.

Affected accounts: Sales Journal, Debtor control

2 A casting error in the control account (統制帳戶加總出錯) (no error in the ledger) Suppose the balance of the control account as at 31 July 2010 was wrongly calculated as $7,000 instead of $8,000, the debit balance in the control account were understated by $1,000 (while the other entries were correctly made). The control account would be affected as follows:


“ 31 Banks 5,400 “ 31 Discounts allowed 600 “ 31 Balance c/d (wrongly calculated) 7,000 15,000 15,000

The debtors’ accounts in the accounts receivable ledger and the list of debtors’ balances in the accounts receivable ledger would not be affected.


As a result, the balance of the control account would differ from the total of balances in the accounts receivable ledger. Since the

errors are mainly in the control account, the corrections required are in the control account. No error in the accounts receivable

ledger so no adjustment is needed in the accounts receivable ledger.

Affected accounts: Debtor control

15

3 An entry omitted from a debtor’s account (漏記債務人帳戶) (no error in the control account) Suppose the entry on 18 July 2010 was not posted from the returns inwards journal to the debtor ’s account (while the other

entries were correctly made).

H Mok 2010 $ 2010 $ Jul 6 Sales 3,000 “ 28 Bank 2,200

“ 30 Sales 2,000 “ 28 Discounts allowed 200 “ 31 Balance c/d 2,600 5,000 5,000

The list of debtors’ balances in the accounts receivable ledger would be affected as follows:


However, the control account would not be affected.



As a result, the balance of the control account would differ from the total of balances in the accounts receivable ledger. Since the errors are mainly in the accounts receivable ledger, the corrections required are in the accounts receivable ledger. No error in the control account so no adjustment is needed in the control account.

Affected accounts: A debtor, Debtors balances

4 A wrong entry in a debtor’s account (錯記債務人帳戶) (no error in the control account) Suppose the entry on 18 July 2010 was posted from the returns inwards journal to the debtor ’s account with a wrong amount.

H Mok

2010 $ 2010 $ Jul 6 Sales 3,000 Jul 18 Returns inwards 60

“ 30 Sales 2,000 “ 28 Bank 2,200 “ 28 Discounts allowed 200 “ 31 Balance c/d 2,540 5,000 5,000







errors are mainly in the accounts receivable ledger, the corrections required are in the accounts receivable ledger. No error in the

control account so no adjustment is needed in the control account.


16

Suppose the entry on 18 July 2010 was posted from the returns inwards journal to the debit side of the debtor ’s account (while the

other entries were correctly made). The debtors’ accounts and the list of debtors’ balances would be affected as follows:

H Mok

2010 $ 2010 $ Jul 6 Sales 3,000 Jul 28 Bank 2,200

“ 18 Returns inwards 600 “ 28 Discounts allowed 200 “ 30 Sales 2,000 “ 31 Balance c/d 3,200 5,600 5,600







errors are mainly in the accounts receivable ledger, the corrections required are in the accounts receivable ledger. No error in the

control account so no adjustment is needed in the control account.


You have come across some common types of errors that would or would not affect the agreement of balances of a control

account and its corresponding ledger. However, there are many other types of errors that have not been mentioned. You will see

more types of errors in the assessment part and you need to practice more questions in order to familiarize dealing with all kind of

errors in the examination.

Class work 7

Errors Affected accounts

Debtors Control

Debtors Balances

(i) Sales of $1,250 had been entered on the wrong side of the debtor’s account in the accounts receivable ledger.

A debtor, debtors balances

(ii) One page of the sales day book had been undercast by $110. Sales journal, Debtor

Control

(iii) A credit balance of $428 had been netted off with the debit balances in the list of debtors’ balances.


(iv) Bad debt of $680 had been omitted from the control account.

Debtor Control

(v) Returns inwards had been undercast by $121 Returns inwards, Debtor

Control

(vi) A debit balance of $5,200 was omitted from the list of debtors’ balances and wrongly shown as a credit balance of $3,400 in the list of creditors’ balances.


(vii) There was a balance of $4,820 in the allowance for doubtful debts account on 1 January 2009. An allowance for doubtful accounts of 5% had not been made.

Allowance for doubtful debts

(viii) Motor expenses of $600 had been omitted from the books. Motor expenses

17

5.8 Errors not affecting the agreement of balances of a control account and its corresponding ledger (不會導致統制帳戶與相關分類帳的餘額不相等的錯誤)

5 An entry omitted from a book of original entry (漏記原始分錄簿) If the sales transaction made on 30 July 2010 was omitted from the sales journal (while the other entries were correctly made).

Sales Journal Date Details Amount 2010 $

Jul 2 J Chan 4,000 " 6 H Mok 3,000 " 24 B Leung 6,000 " 31 Total credit sales for the month 13,000

The debtors’ accounts in the accounts receivable ledger, the list of debtors’ balances in the accounts receivable ledger and the control account would then be affected as follow:

H Mok 2010 $ 2010 $ Jul 6 Sales 3,000 Jul 18 Returns inwards 600

“ 28 Bank 2,200 “ 28 Discounts allowed 200 3,000 3,000

List of Balances in the Accounts Receivable Ledger as at 31 July 2010 $ B Leung 6,000 Total of debtors’ balances (debit) 6,000


2010 $ 2010 $ Jul 31 Sales 13,000 Jul 31 Returns inwards 1,000


As a result, the balance of the control account would still equal the total of balances in the accounts receivable ledger. Since the errors are in the accounts receivable ledger and the control account, the corrections required are both in the accounts receivable ledger and the control account.

Affected accounts: Sales journal, A debtor, debtors balances and debtors control

6 A wrong amount entered in a book of original entry (原始分錄簿錯記金額) If the sales transaction made on 6 July 2010 was wrongly entered in the sales journal as follows:

Sales Journal Date Details Amount 2010 $

Jul 2 J Chan 4,000 " 6 H Mok 2,000 " 24 B Leung 6,000 " 30 H Mok 2,000 " 31 Total credit sales for the month 14,000

The debtors’ accounts in the accounts receivable ledger, the list of debtors’ balances in the accounts receivable ledger and the control account would then be affected as follow:

H Mok


“ 30 Sales 2,000 “ 28 Bank 2,200 “ 28 Discounts allowed 200 “ 31 Balance c/d 1,000

4,000 4,000

List of Balances in the Accounts Receivable Ledger as at 31 July 2010

$ H Mok 1,000 B Leung 6,000

Total of debtors’ balances (debit) 7,000

A wrong amount entered and the casting error in a book of original entry is difference. “A casting error” occurs in the total sum of the sales journal so it does not affect the accounts receivable ledger but “a wrong amount entered” do affect the accounts receivable ledger

18



“ 31 Banks 5,400 “ 31 Discounts allowed 600 “ 31 Balance c/d (balancing figure) 7,000

14,000 14,000

As a result, the balance of the control account would still equal the total of balances in the accounts receivable ledger. Since the errors are in the accounts receivable ledger and the control account, the corrections required are both in the accounts receivable ledger and the control account.

Affected accounts: Sales journal, A debtor, debtors balances and debtors control

7 An entry wrongly posted to another debtor’s account (錯誤過帳到另一債務人帳戶內) Suppose the entry on 30 July 2010 was wrongly posted from the sales journal to J Chan’s account instead of H Mok’s account. J Chan and H Mok’s account would be affected as follows:

J Chan


“ 30 Sales 2,000 “ 22 Bank 3,200 “ 22 Discounts allowed 400 “ 31 Balance c/d 2,000

6,000 6,000

H Mok


“ 28 Bank 2,200 “ 28 Discounts allowed 200

3,000 3,000


List of Balances in the Accounts Receivable Ledger as at 31 July 2010

$ J Chan 2,000 B Leung 6,000

Total of debtors’ balances (debit) 8,000

However, the control account would not be affected. Accounts Receivable Ledger Control


“ 31 Banks 5,400 “ 31 Discounts allowed 600 “ 31 Balance c/d (balancing figure) 8,000

15,000 15,000

As a result, the balance of the control account would still equal the total of balances in the accounts receivable ledger. Since no

errors are in the accounts receivable ledger balances and the control account, no correction is required in either the accounts

receivable ledger balances or the control account.

Affected accounts: A debtor

19

Class work 8

Errors Affected Accounts Debtor

balances Debtor control

Creditor balances

Creditor control

(i) The sales day book had been undercast by $4,000. Sales journal, debtor control

(ii) The only credit balance of $3,600 in the list of sales ledger balances should have been a debit balance.

Debtor balances

(iii)

No entries had been made in respect of goods returned by a customer on 31 March 2007. These goods had a cost of $5,300 and were listed at a mark-up of 40%. A trade discount of 5% had been given to the customer.

Returns inwards, debtor control, debtor balances

(iv)

Net cash receipts of $7,200 from customers had been posted to the debtors control account as $7,800. No entries had been made in respect of the cash discount of 10% on the amount receivable.

debtor control, debtor balances, Discount allowed, debtor control

(v) A dishonoured cheque from a customer for $7,500 had not been recorded.

Debtor balances, Bank, debtor control

(vi)

A contra entry of $1,000 had been recorded in the sales ledger and purchases ledger respectively. No entries had yet been made in the control accounts.

debtor control, creditor control

(vii) No entries of bad debts of $2,400 were to be written off on 31 March 2007.

Debtor balances, Bad debts, debtor control

(viii)

The company had a balance of $20,000 in the provision for doubtful debts account on 1 April 2006. A provision of 10% on debtors was to be made on 31 March 2007.

Provision for doubtful account

(ix) A sale invoice of $8,120 had been entered in the sales day book as $8,210.

Sales journal, debtors control, debtor balances

(x) A purchases invoice had been recorded inclusive of trade discounts of $120.

Purchases journal, creditor control, creditor balances

(xi) A cash discount of $230 allowed to a debtor had been omitted from the books.

Discount allowed, Debtors control, debtor balances

(xii)

A purchase invoice for $1,425 had been entered twice in the purchases journal and posted twice to the personal account of a creditor.


(xiii)

The owner took $1,000 worth of goods for private use, but the amount was recorded in the sales journal and the accounts receivable ledger.

Purchases journal, Sales journal, debtor balances, debtor control,

creditor control

(xiv) Office equipment costing $2,500 bought on credit had been recorded in the purchases journal.


(xv) A sales invoice had been undercast by $50. Sales journal, Debtor control, debtor balances

(xvi) Goods purchased from M Lee for $1,800 had been recorded as a sale to M Leung in the sales day book.

Purchases journal, Sales journal, Debtor control, Creditor control,

debtor balances, creditor balances

(xvii)

A sales invoice of $682 had been entered in the sales journal as $628, but posted twice to the personal account of the debtor.

Sales journal, debtor control, debtor balances

(xviii) A cheque for $14,000 drawn on 10 April 2009 to settle a creditor’s account had not yet been presented to the bank account.

Bank, creditor control, creditor balances

(xix)

Goods purchased with a list price of $1,500 had been returned to the supplier due to defects. The supplier had given a trade discount of 15% on these goods. The return had not been recorded in the books of Sky Target Co.

Returns outwards, creditor control, creditor balances

(xx)

No entries had been made to record the set off of an amount owed to H Chak of $3,600 against an equal amount owed by H Chak.

Debtor balances, creditor balances, debtor control, creditor control

20

5.9 Reconciliation of the balances of control accounts with those of their corresponding ledgers (調節統制帳戶與相關分類帳的餘額)

When the errors are found, we would make corrections in the relevant books or ledgers, and adjust the control account accordingly.

In public examinations, candidates are usually required to show the corrections (考生需要顯示更正) of the account receivable or

accounts payable ledger in a statement (在修訂表內) (Statement of Correction or Statement of revise, Statement of the revised

total of the sales/purchases ledger ), and then make adjusting entries in the control account (然後在統制帳戶內作出調整).

When we do the question, we need to find out which account will be affected by the error (我們需要找出哪些帳戶將受錯誤影

響). Then decide whether the account receivable, accounts payable or control account need adjustment (然後決定應收賬，應付

賬或統制帳戶需要調整). Finally, make adjusting entries in the account receivable, accounts payable and control account

according to the errors.

1 A casting error in a book of original entry (原始分錄簿加總出錯) Suppose the monthly total of the sales journal was overcast by $1,000. The corrections required in the control account are to

reduce the balance by $1,000.


2010 $ 2010 $ Jul 31 Balance b/d 9,000 Jul 31 Sales overcast 1,000


9,000 9,000

No adjustment is needed in the account receivable ledger.

Class work 9

The control account balance, $4,000 did not agree with the total of the accounts receivable ledger for the year ended 31 March 2010. Draw up the corrections in the accounts receivable ledger control account for the sales day book undercasting by $1,000.


2010 $ 2010 $

Mar 31 Balance b/f 4,000 Mar 31 Balance c/d 5,000

“ 31 Sales undercast 1,000

5,000 5,000

2 A casting error in the control account (統制帳戶加總出錯) Suppose the debit balance in the control account were understated by $1,000. The correction required in the control account is to

increase the balance by $1,000.


2010 $ 2010 $ Jul 31 Balance b/d 7,000 Jul 31 Balance c/d 8,000

“ 31 Debit total understated 1,000

8,000 8,000

No adjustment is needed in the account receivable ledger.

Class work 10

Suppose the debit balance of the control account were overstated by $1,000. Draw up the corrections in the accounts receivable ledger control account if the control account balance before correction is $6,000 as at 31 July 2010.


2010 $ 2010 $

Jul 31 Balance b/f 6,000 Jul 31 Debit total overstated 1,000


6,000 6,000

21

3 An entry omitted from a debtor’s account (漏記債務人帳戶) Suppose the entry on 18 July 2010 was not posted from the returns inwards journal to the debtor ’s account. The corrections

required are reducing the balances in the accounts receivable ledger by $600 and we need to prepare the “Statement of Revised

Total of Accounts Receivable Ledger Balance” as follow:

Statement of Revised Total of Accounts Receivable Ledger Balance as at 31 July 2010

$ Original total of balance 8,600 Less Returns inward omitted (600)

Corrected total balances 8,000

No adjustment is needed in the control account.

Class work 11

No entry had been made in respect of goods returned by a customer on 31 March 2007. These goods had a cost of $5,300 and a trade discount of 5% had been given to the customer. Prepare a statement to revise the total of account receivable ledger balances if the total balance from the accounts receivable ledger before adjustments is $30,000

Statement of Corrected Accounts Receivable Ledger Balance as at 31 March 2007

$

Original total of balance 30,000

Less Returns inward omitted ($5,300 x 95%) (5,035)


4 A wrong entry in a debtor’s account (錯記債務人帳戶) (a) Suppose goods of $600 returned by a debtor, H Mok, had been posted to his account in the accounts receivable ledger at $60.

The corrections required are reducing the balances in the accounts receivable ledger by $540 ($600 $60) and we need to prepare the “Statement of Revised Total of Accounts Receivable Ledger Balance” as follow:


$ Original total of balance 8,540 Less Returns inward wrongly entry ($600 $60) (540) Corrected total balances 8,000 No adjustment is needed in the control account.

(b) Suppose goods of $600 returned by a debtor, H Mok, had been posted to the debit side of his account in the accounts receivable ledger. The corrections required are reducing the balances in the accounts receivable ledger by $1,200 ($600x2) and we need to prepare the “Statement of Revised Total of Accounts Receivable Ledger Balance” as follow:


$ Original total of balance 9,200 Less Returns inward wrongly entry ($600x2) (1,200) Corrected total balances 8,000 No adjustment is needed in the control account.

Class work 12

The debit balance of $470 had been listed as a credit balance in the debtors’ schedule on 31 March 2007. Prepare a statement to revise the total of account receivable ledger balances if the total balance from the accounts receivable ledger before adjustments is $2,000


$


Add balance wrongly entry ($470 x 2) 940


22

5 An entry omitted from a book of original entry (漏記原始分錄簿) Suppose sales of $2,000 had been omitted from the sales journal. The corrections required are increasing the balances in the control account and accounts receivable ledger by $2,000 and we need to adjust control account and prepare the “Statement of Revised Total of Accounts Receivable Ledger Balance” as follow:

Accounts Receivable Ledger Control 2010 $ 2010 $ Jul 31 Balance b/d 6,000 Jul 31 Balance c/d 8,000

“ 31 Sales omitted 2,000 8,000 8,000

Statement of Revised Total of Accounts Receivable Ledger Balance as at 31 July 2010 $ Original total of balance 6,000 Add Sales omitted 2,000 Corrected total balances 8,000

Class work 13

A cash discount of $230 allowed to a debtor had been omitted from the books on 31 March 2007. Make adjustment in the control account and accounts receivable ledger if the balances of both accounts before adjustments are $2,000.


2007 $ 2007 $

Mar 31 Balance b/f 2,000 Mar 31 Discount allowed omitted 230


2,000 2,000


$


Less Discount allowed omitted (230)


6 A wrong amount entered in a book of original entry (原始分錄簿錯記金額) Suppose sales of $3,000 had been recorded as $2,000 in the sales journal. The corrections required are increasing the balances in the control account and accounts receivable ledger by $1,000 and we need to adjust control account and prepare the “Statement of Revised Total of Accounts Receivable Ledger Balance” as follow:


2010 $ 2010 $ Jul 31 Balance b/d 7,000 Jul 31 Balance c/d 8,000

“ 31 Sales understated 1,000

8,000 8,000


$ Original total of balance 7,000 Add Sales understated 1,000


Class work 14

A sale invoice of $8,120 had been entered in the sales day book as $8,210 on 31 March 2007. Make adjustment in the control account and accounts receivable ledger if the balances of both accounts before adjustments are $2,000.


2007 $ 2007 $

Mar 31 Balance b/f 2,000 Mar 31 Sales overstated ($8,210 - $8,120) 100


2,000 2,000


$


Less Sales overstated ($8,210 - $8,120) (100)


23

7 A entry wrongly posted to another debtor’s account (錯誤過帳到另一債務人帳戶內) Suppose sales of $2,000 to a debtor, H Mok, had been posted to the account of another, J Chan, in the accounts receivable ledger.

No correction is needed in either the balances of the accounts receivable ledger or the control account.

A more complicated example The balances of the accounts receivable ledger as at 31 December 2009, the year end date, amounted to $94,650 (debit). However, the balances did not agree with the debit balance of accounts receivable ledger control account and the credit balance of the control account is $428. Upon investigation, the following errors were found: (i) A sale invoice of $8,120 had been entered in the sales day book as $8,210. (ii) Sales of $1,250 had been entered on the wrong side of the debtor ’s account in the accounts receivable ledger. (iii) A cash discount of $230 allowed to a debtor had been omitted from the books. (iv) One page of the sales day book had been undercast by $110. (v) No entries had been made to record a set-off of $4,500 between the accounts receivable and accounts payable ledgers. (vi) A credit balance of $428 had been netted off with the debit balances in the list of debtors’ balances. (vii) There was a balance of $4,820 in the allowance for doubtful debts account on 1 January 2009. An allowance for doubtful

accounts of 5% had not been made. Make the adjustment on the control account and accounts receivable ledger balances.

Guidelines: Before you start solving the question, you need to decide whether each of the errors affected the accounts receivable ledger or the accounts receivable ledger control account, or both:

Error The accounts receivable ledger The accounts receivable ledger control account

(i) (ii) (iii) (iv) (v) (vi) (vii)

Answer: Statement of Revised Balances in the Accounts Receivable Ledger as at 31 December 2009

$ $ Debit balances before adjustments 94,650 Add Sales wrongly credited to debtor’s account ($1,250 x 2) (ii) 2,500 Debit balance netted off (vi) 428 2,928

97,578

Less Sales overcast ($8,210 $8,120) (i) 90

Discounts allowed omitted (iii) 230 Set-off with accounts payable ledger (v) 4,500 (4,820)

Debit balances after adjustments 92,758

Credit balances before adjustments 0 Add Credit balance netted off (vi) 428

Credit balances after adjustments 428

Accounts Receivable Ledger Control 2009 $ 2009 $ Dec 31 Balance b/f (balancing figure) 97,468 Dec 31 Balance b/f 428

“ 31 Sales undercast (iv) 110 “ 31 Sales overcast ($8,210 $8,120) (i) 90

“ 31 Balance c/f 428 “ 31 Discounts allowed omitted (iii) 230 “ 31 Set-off with accounts payable (v) 4,500

“ 31 Balance c/f 92,758

98,006 98,006

After correcting all the errors, the balances of the control account will equal to those in the accounts receivable ledger.

24

5.10 Need for control accounts (編製統制帳戶的需要) Help test the arithmetical accuracy of ledgers (協助測試分類帳的記帳的運算準確性) To provide an internal check on the accuracy of entries by comparing the total balances in the control accounts with the total of individual account balances in the subsidiary ledgers. This will help to locate errors more quickly.

Help safeguard against fraud (有助防止個別簿記員舞弊) Control accounts should be prepared by a group of people different from those who make entries in the books of original entry and ledger. When there is a separation of bookkeeping duties, the control accounts provide an independent check and help safeguard against fraud.

Facilitate the preparation of financial statements (有助企業編製財務報表) To summarise the transactions of subsidiary ledger accounts and to provide a debtors’ balance and creditors’ balance more quickly. This can facilitate the preparation of a trial balance and balance sheet.

Class work 15

1. M Cheung drew up the accounts receivable ledger control account for the year ended 31 December 2010. But the control account balance, $4,560, did not agree with the total of the accounts receivable ledger balances, which amounted to $3,770.

Upon investigation, the following errors were discovered: (i) The sales day book had been overcast by $640. (ii) A sales invoice had been undercast by $50. (iii) Goods of $200 returned by a debtor had been recorded in the debtor’s account as $20. (iv) The debit balance of a debtor’s account, $330, had been omitted from the list of accounts receivable ledger balances. (v) A cash sale amounting to $300 had been omitted from the books.

Required: (a) Determine whether the accounts receivable ledger balances or the accounts receivable ledger control account, or both will be

affected.

(b) Draw up the accounts receivable ledger control account to determine the correct balance.

(c) Prepare a statement to ascertain the total of the accounts receivable ledger balances after corrections.

Answer: (a)

Error The accounts receivable ledger balances The accounts receivable ledger control account

(i) (ii) (iii) (iv) (v)

(b)


2010 $ 2010 $

Dec 31 Balance b/d 4,560 Dec 31 Sales overcast (i) 640 “ 31 Sales undercast (ii) 50 “ 31 Balance c/f 3,970

4,610 4,610

(c)

Statement of Corrected Accounts Receivable Ledger Balance as at 31 December 2010

$ $

Debit balances before adjustments 3,770

Add Sales undercast (ii) 50

Balance omitted (iv) 330 380

4,150

Less Returns inward understated ($200 $20) (iii) (180)


25

2. The total balance extracted from the accounts receivable ledger as at 31 December 2009 amounted to $38,253, which did not

agree with the balance in its control account $30,902. Subsequently, the following errors were found to have affected the

agreement of these two amounts.

(i) A sales invoice of $682 had been entered in the sales journal as $628, but posted twice to the personal account of the

debtor.

(ii) A cheque of $3,679 received from a debtor had been debited to his account as $3,697.

(iii) Returns inwards had been undercast by $121.

(iv) The debit side of a debtor’s account had been undercast by $200.

(v) Discounts allowed had been overcast by $600 in the discount column in the cash book.

(vi) A cheque of $1,280 had been received for a bad debt of $3,280 written off in the previous year. No entry had been made

in the books in respect of this.

(vii) A debit balance of $466 in a debtor’s account had been included in the list of accounts receivable ledger balances as a

credit balance.

Required: (a) Determine whether the accounts receivable ledger balances or the accounts receivable ledger control account, or both will be

affected.

(b) Prepare a statement to show the revised total of the accounts receivable ledger balances.

(c) Draw up the accounts receivable ledger control account, showing the required adjustments and the balances before

adjustments.

Answer: (a)



(b)

Statement of Revised Total of Accounts Receivable Ledger Balances as at 31 December 2009

$ $


Add Debit total of a debtor’s account undercast (iv) 200

Debit balance included as a credit balance ($466 x 2) (vii) 932 1,132

39,385

Less Sales understated and entered twice ($628 x 2 $682) (i) (574)

Cheque received wrongly debited to debtor’s account ($3,697 $3,679) (ii) (7,376) (7,950)



2009 $ 2009 $

Dec 31 Balance b/f 30,902 Dec 31 Returns inwards undercast (iii) 121

“ 31 Sales undercast ($682 $628) (i) 54 “ 31 Balance c/f 31,435

“ 31 Discounts allowed overcast (v) 600

31,556 31,556

Bad debt recovered is no effect on the balance of control and ledger

26

3. The following balances were extracted from the books of Sediment Co as at 31 March 2010:

Dr

Accounts receivable ledger $23,147

Accounts receivable ledger control $38,934

Upon investigation, the following errors were discovered:

(i) Bad debts totalling $12,232 should have been written off.

(ii) A debt of $1,500 written off in 2008 was recovered on 31 March 2010, but no entry was made in the control account.

(iii) Goods amounting to $2,100 returned by Mandy Chow, a trade debtor, were wrongly recorded in the returns outwards

journal. The amount was then posted to the debit side of Mandy Chow’s account in the accounts receivable ledger.

(iv) The owner took $4,550 worth of goods for private use but this had been wrongly treated as credit sales. The amount was

recorded in the sales journal and the accounts receivable ledger.

(v) A contra entry of $3,500 in the control accounts was entered on the debit side of the accounts receivable ledger control

account and the credit side of the accounts payable ledger control account.

(vi) Discounts allowed of $327 had been correctly posted to the individual debtors’ accounts, but credited in the discounts

received column of the cash book.

(vii) The debit balance of a trade debtor’s account of $10,560 had been omitted from the list of accounts receivable ledger

balances and wrongly shown as a credit balance of $7,560 in the list of the accounts payable ledger balances.

Required: (a) Write up the accounts receivable ledger control account and show the balance as at 31 March 2010. (b) Prepare a statement to revise the total of accounts receivable ledger balances.

Answer:

(a)


2010 $ 2010 $

Mar 31 Balance b/d 38,934 Mar 31 Bad debts (i) 12,232

" 31 Bad debts recovered (ii) 1,500 " 31 Bank ─ Bad debts recovered (ii) 1,500

" 31 Returns inwards omitted (iii) 2,100

" 31 Sales overstated — Drawings (iv) 4,550

" 31 Accounts payable ledger control —

Contra entry error ($3,500 × 2) (v) 7,000

" 31 Discounts allowed omitted (vi) 327

" 31 Balance c/d 12,725

40,434 40,434

(b)

Statement of Revised Total of Accounts Receivable Ledger Balances as at 31 March 2010

$ $

Original total of balances 23,147

Add Debit balance omitted (vii) 10,560

33,707

Less Bad debts written off (i) 12,232

Returns inwards wrongly debited to Mandy Chow’s account ($2,100 2) (iii) 4,200

Sales overstated — Drawings (iv) 4,550 (20,982)

Revised total of balances 12,725

Bad debt recovered is no effect on the balance of control and ledger

27

Accounts Payable 4. W Lau drew up the accounts payable ledger control account for the year ended 31 March 2010. But the control account

balance, $5,850, did not agree with the total of the accounts payable ledger balances. Upon investigation, the following errors

were found:

(i) The purchases day book had been undercast by $230.

(ii) Goods purchased from a creditor costing $870 had been debited to the personal account in the accounts payable

ledger.

(iii) A purchases invoice had been recorded inclusive of trade discounts of $120.

(iv) The total of the accounts payable ledger balances had been overcast by $610.

(v) Motor expenses of $600 had been omitted from the books.

Required:

(a) Determine whether the accounts payable ledger balances or the accounts payable ledger control account, or both will be

affected.

(b) Draw up the accounts payable ledger control account to determine the correct balance.

(c) Prepare a statement to ascertain the total of the accounts payable ledger balances before corrections.

Answer: (a)

Error The accounts payable ledger balances The accounts payable ledger control account

(i) (ii) (iii) (iv) (v)

(b)


2010 $ 2010 $

Mar 31 Purchases overstated (iii) 120 Mar 31 Balance b/f 5,850

“ 31 Balance c/f 5,960 “ 31 Purchases undercast (i) 230

6,080 6,080

(c)


$ $

Original balance (balancing figure) 4,950

Add Purchases wrongly debited to creditor’s account ($870 x 2) (ii) 1,740

6,690

Less Purchases overstated (iii) 120

Total balances overcast (iv) 610 (730)


28

5. The total of balances extracted from the accounts payable ledger of Stone Co on 31 December 2010 amounted to $130,589,

which did not agree with the balance of $132,118 shown in the accounts payable ledger control account. The following errors

were subsequently discovered:

(i) Discounts received had been correctly posted to individual creditors’ accounts, but had been overcast by $1,200 in the

discount column in the cash book.

(ii) A credit balance of $2,137 in a creditor’s account had been shown in the list of accounts payable ledger balances as $213.

(iii) A purchase invoice for $1,425 had been entered twice in the purchases journal and posted twice to the personal account of a

creditor.

(iv) A cheque for $14,000 drawn on 10 April 2009 to settle a creditor’s account had not yet been presented to the bank.

(v) A cheque for $3,678 paid to a creditor had been posted to his account as $3,687.

(vi) The purchases journal had been overcast by $596.

(vii) The debit side of a creditor’s account had been overcast by $200.

Required:

(a) Determine whether the accounts payable ledger balances or the accounts payable ledger control account, or both will be

affected.

(b) Draw up the accounts payable ledger control account to calculate the correct balance.

(c) Prepare a statement to show the revised total of the accounts payable ledger balances

Answer: (a)



(b)


2010 $ 2010 $

Dec 31 Purchases entered twice (iii) 1,425 Dec 31 Balance b/f 132,118

“ 31 Purchases overcast (vi) 596 “ 31 Discounts received overcast (i) 1,200

“ 31 Balance c/f 145,297 “ 31 Bank – Stale cheque (iv) 14,000

147,318 147,318

(c)

Statement of Revised Total of Accounts Payable Ledger Balances as at 31 December 2010

$ $

Original balance 130,589

Add Creditor balance understated ($2,137 $213) (ii) 1,924

Bank – Stale cheque (iv) 14,000

Cheque payment posting error ($3,687 $3,678) (v) 9

Casting error (vii) 200 16,133

146,722

Less Purchases entered twice (iii) (1,425)


The wrong posing amount is greater than the cheque. This means we deduct more amount than we owe the creditor so we need to add back the extra deducting amount to adjust the error.

If the debit side of creditor’s account overcast, we have deducted more amount of the balance in accounts payable so we need to add back the extra deducting amount to adjust the error.

29

6. The following balances were extracted from the books of Sky Target Co on 31 July 2010: $ Accounts payable ledger control account, 1 July 2010 163,252 Transactions during the month of July 2010: Cash purchases 52,300 Credit purchases 72,550 Cash and cheque payments to trade creditors 83,567 Discounts received 3,900 Returns outwards on cash purchases 3,265 Returns outwards on credit purchases 4,650

Required: (a) Draw up the accounts payable ledger control account for the month of July 2010.


2010 $ 2010 $

Jul 31 Cash and Bank 83,567 Jul 1 Balance b/d 163,252


“ 31 Returns outwards 4,650

“ 31 Balance c/d 143,685

235,802 235,802

The total of the accounts payable ledger balances showed a credit balance of $164,005 as at 31 July 2010 and differed from the

control account balance. Upon investigation, the following errors were discovered:

(i) The purchases journal had been undercast by $4,600.

(ii) Office equipment costing $2,500 bought on credit had been recorded in the purchases journal.

(iii) A cheque of $3,520 was issued to a trade creditor. The payment had been properly recorded in the cash book but had not

been posted to the creditor’s account.

(iv) Goods purchased with a list price of $1,500 had been returned to the supplier due to defects. The supplier had given a trade

discount of 15% on these goods. The return had not been recorded in the books of Sky Target Co.

(v) A cheque payment of $13,500 to a trade creditor had been correctly recorded in the cash book but debited to a debtor’s

account in the accounts receivable ledger.

(vi) A purchase invoice of $4,720 had been recorded in the purchases journal as $4,120.

(vii) A contra arrangement of $1,300 with a trade creditor had been recorded in the accounts receivable and accounts payable

ledgers but not in the control accounts.

Required: (b) Determine whether the accounts payable ledger balances or the accounts payable ledger control account, or both will be

affected.

(c) Update the accounts payable ledger control account with the required adjustments. Start with the balance in part (a).

(d) Prepare a statement to reconcile the updated accounts payable ledger control account balance with the total of the accounts

payable ledger balances.

(b)



30

(c)


2010 $ 2010 $

Jul 31 Office equipment (ii) 2,500 Jul 31 Balance b/f 143,685

“ 31 Returns outwards “ 31 Purchases (i) 4,600

($1,500 x 85%) (iv) 1,275 “ 31 Purchases ($4,720 — $4,120) (vi) 600

“ 31 Set-off — Accounts receivable

ledger control (vii) 1,300

“ 31 Balance c/f 143,810

148,885 148,885

(d)

Statement of Revised Total of Accounts Payable Ledger Balances as at 31 July 2010

$ $

Original balance 164,005

Add Purchases understated ($4,720 - $4,120) (vi) 600

164,605

Less Office equipment purchases recorded as goods purchase (ii) 2,500

Payment to a trade creditor omitted (iii) 3,520

Returns outwards omitted ($1,500 x 85%) (iv) 1,275

Payment to a trade creditor wrongly debited to accounts receivable ledger (v) 13,500 (20,795)


31

7. The following balances were extracted from the books of Lucky Co as at 31 March 2011, the financial year-end date:

Dr Cr

$ $

Accounts receivable ledger 17,822

Accounts receivable ledger control 34,890

Accounts payable ledger 24,182

Accounts payable ledger control 27,450

The reasons for the differences between the ledger and control accounts are as follows:

(i) The purchases journal had been undercast by $4,000.

(ii) A debt of $300 written off as bad in the last financial year was recovered on 31 March 2011, but no entry was made in the

control account.

(iii) Goods worth $500 returned by Miss Chan were wrongly recorded in the returns outwards journal and posted to the credit

side of Miss Ng’s account in the accounts receivable ledger.

(iv) The owner took $1,000 worth of goods for private use, but the amount was recorded in the sales journal and the accounts

receivable ledger.

(v) A contra entry of $5,500 in the control account was entered on the debit side of the accounts receivable ledger control


(vi) Discounts allowed of $368 were correctly posted to the individual debtor’s account, but credited to the discounts received

column of the cash book.

(vii) A debit balance of $5,200 was omitted from the list of debtors’ balances and wrongly shown as a credit balance of $3,400 in

the list of creditors’ balances.

(a) Determine whether the accounts payable ledger or the accounts payable ledger control account, or both will be affected.

(b) Draw up the accounts receivable ledger control account and the accounts payable ledger control account.

(c) Prepare a statement to revise the total of account receivable ledger balances.

Error The accounts receivable ledger

balances The accounts receivable ledger

control account The accounts payable ledger

control account



2011 $ 2011 $

Mar 31 Balance b/f 34,890 Mar 31 Returns inwards (iii) 500

“ 31 Drawings (iv) 1,000

“ 31 Set-off — Accounts payable

Ledger (5,500 x 2) (v) 11,000

“ 31 Discounts allowed (vi) 368

“ 31 Balance c/f 22,022

34,890 34,890

Correct posting

32


2011 $ 2011 $

Mar 31 Drawings (iv) 1,000 Mar 31 Balance b/f 27,450 “ 31 Set-off — Accounts receivable “ 31 Purchases undercast (i) 4,000

Ledger (5,500 x 2) (v) 11,000 “ 31 Returns outwards (iii) 500 “ 31 Balance c/f 20,318 “ 31 Discounts received (vi) 368

32,318 32,318


$ $

Total of accounts receivable ledger balances before adjustments 17,822

Add Debit balance omitted from the list of debtors’ balances (vii) 5,200

23,022

Less Drawings (iv) (1,000)

Revised total of balance of accounts receivable ledger balances 22,022

The double entry for drawings of assets (goods) is:

Dr Drawings account (in the general ledger)

Cr Purchases account (in the general ledger)

33

The following balances were extracted from the books of Sediment Co as at 31 March 2010:

Dr Cr

Accounts receivable ledger $23,147

Accounts receivable ledger control $38,934

Accounts payable ledger $32,513

Accounts payable ledger control $30,302

Upon investigation, the following errors were discovered:

(viii) The purchases journal had been undercast by $2,000.

(ix) Bad debts totalling $12,232 should have been written off.

(x) A debt of $1,500 written off in 2008 was recovered on 31 March 2010, but no entry was made in the control account.

(xi) Goods amounting to $2,100 returned by Mandy Chow, a trade debtor, were wrongly recorded in the returns outwards

journal. The amount was then posted to the debit side of Mandy Chow’s account in the accounts receivable ledger.

(xii) The owner took $4,550 worth of goods for private use but this had been wrongly treated as credit sales. The amount was

recorded in the sales journal and the accounts receivable ledger.

(xiii) A contra entry of $3,500 in the control accounts was entered on the debit side of the accounts receivable ledger control


(xiv) Discounts allowed of $327 had been correctly posted to the individual debtors’ accounts, but credited in the discounts

received column of the cash book.

(xv) The debit balance of a trade debtor’s account of $10,560 had been omitted from the list of accounts receivable ledger

balances and wrongly shown as a credit balance of $7,560 in the list of the accounts payable ledger balances.

(xvi) A cheque for $6,544 paid to a creditor had been posted to his account as $6,455.

(xvii) Goods amounting to $2,865 had been returned to a supplier and his account was debited for the return accordingly. However,

no record had been made in the return outwards journal.

(a) Determine whether the accounts payable ledger or the accounts payable ledger control account, or both will be affected.

(c) Write up the accounts receivable ledger control account and show the balance as at 31 March 2010.

(d) Write up the accounts payable ledger control account and show the balance as at 31 March 2010.

(e) Prepare a statement to revise the total of accounts receivable ledger balances.

(f) Prepare a statement to revise the total of accounts payable ledger balances. (12 marks)

Error The accounts receivable

ledger balances The accounts receivable ledger control account

The accounts payable ledger balances

The accounts payable ledger control account

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x)

34


2010 $ 2010 $

Mar 31 Balance b/f 38,934 Mar 31 Bad debits (ii) 12,232

“ 31 Returns inwards omitted (iv) 2,100

“ 31 Drawings (v) 4,550

“ 31 Set-off — Accounts payable

“ 31 ledger ($3,500 x 2) (vi) 7,000

“ 31 Discounts allowed omitted (vii) 327

“ 31 Balance c/f 12,725

38,934 38,934


2010 $ 2010 $

Mar 31 Set-off — Accounts receivable Mar 31 Balance b/f 30,302

Ledger ($3,500 x 2) (vi) 7,000 “ 31 Purchases journal undercast (i) 2,000

“ 31 Returns outwards omitted (x) 2,865 “ 31 Returns outwards overstated (iv) 2,100

“ 31 Balance c/f 24,864 “ 31 Discounts received overstated (vii) 327

34,729 34,729


$ $


Add Debit balance omitted (viii) 10,560

33,707

Less Bad debts written off (ii) 12,232

Returns inwards wrongly debited to Manday Chow’s account ($$2,100 x 2) (iv) 4,200

Sales overstated Drawings (v) 4,550 (20,982)


Statement of Revised Total of Accounts Payable Ledger Balances as at 31 March 2010

$ $


Less Debit balance in the accounts receivable ledger shown as a credit balance in accounts

payable ledger (viii) 7,560

Payment undercast ($6,544 6,455) (ix) 89 (7,649)


35

12X The following balances were extracted from the books of Lucky Co as at 31 March 2011, the financial year-end date: Dr Cr $ $ Accounts receivable ledger control account: 46,540 470 Accounts payable ledger control account: 230 38,220 The reasons for the differences between the ledger and control accounts are as follows:

(i) The purchases day book had been overcast by $290

(ii) A sales invoice of $7,650 had been entered in the sales day book as $7,560.

(iii) Goods purchased from M Lee for $1,800 had been recorded as a sale to M Leung in the sales day book.

(iv) Purchases of $850 had been entered on the wrong side of a creditor’s account in the accounts payable ledger.

(v) Bad debt of $680 had been omitted from the control account.

(vi) No entry had been made to record the set off of an amount owed to H Chak of $3,600 against an equal amount owed by H

Chak.

(vii) The credit total of the accounts payable ledger control account had been overcast by $90.

(viii) The credit balance of $470 had been listed as a debit balance in the debtors’ schedule.

(a) Determine whether the receivable, payable, receivable control or payable control account will be affected.

(b) Draw up the accounts receivable ledger and accounts payable ledger control account to determine their correct balances.

(c) Prepare statements to ascertain the totals of the accounts receivable ledger and accounts payable ledger balances beore

correct. revise the total of account receivable ledger balances.

(a)

Error The accounts receivable

ledger balances The accounts receivable ledger control account

The accounts payable ledger balances

The accounts payable ledger control account

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii)

(b)


$ $

Balance b/f 46,540 Balance b/f 470

Sales ($7,650 $7,560) (ii) 90 Sales (iii) 1,800

Balance c/f 470 Bad debt (v) 680

Set-off – Accounts payable ledger (vi) 3,600

Balance c/f 40,550

47,100 47,100


$ $

Balance b/f 230 Balance b/f 38,220

Purchases overcast (i) 290 Purchases (iii) 1,800

Set-off – Accounts payable ledger (vi) 3,600 Balance c/f 230

Balance overcast (vii) 90

Balance c/f 36,040

40,250 40,250

36

(c)

Statement of Accounts Receivable Ledger Balances as at 31 March 2009 (before corrections)

$ $

Adjusted total of debit balances 40,550

Add Purchased wrongly recorded as sales (iii) 1,800

Set-off – Accounts payable ledger (vi) 3,600

Credit balance wrongly listed as a debit balance (viii) 470 5,870

46,420

Less Sales understated ($7,650 $7,560) (ii) (90)

Total of debit balances before corrections 46,330

Total of credit balances before corrections 0

Statement of Accounts Payable Ledger Balances as at 31 March 2009 (before corrections)

$ $

Adjusted total of credit balances 36,040

Add Set-off – Accounts receivable ledger (vi) 3,600

39,640

Less Purchased wrongly recorded as sales (iii) 1,800

Purchases wrongly debited ($850 x 2) (iv) 1,700 (3,500)

Total of credit balances before corrections 36,140

Total of debit balances before corrections 230

3. The following balances were extracted from the books of Lucky Co as at 31 March 2011, the financial year-end date: Dr Cr $ $ Accounts receivable ledger control account: 46,540 470 But the total of the accounts receivable ledger balances, which amounted to $46,330 did not agree with the balance of accounts receivable ledger control account. The reasons for the differences between the ledger and control accounts are as follows: (i) A sales invoice of $7,650 had been entered in the sales day book as $7,560.

(ii) Goods purchased from M Lee for $1,800 had been recorded as a sale to M Leung in the sales day book.

(iii) Bad debt of $680 had been omitted from the control account.

(iv) No entry had been made to record the set off of an amount owed to H Chak of $3,600 against an equal amount owed by H

Chak.

(v) The credit balance of $470 had been listed as a debit balance in the debtors’ schedule.

Required:

(a) Determine whether the accounts receivable ledger balances or the accounts receivable ledger control account, or both will be

affected.

(b) Draw up the accounts receivable ledger control account.

(c) Prepare a statement to revise the total of account receivable ledger balances.

Answer:

(a)

37


(i) (ii) (iii) (iv) (v)

(b)


2011 $ 2011 $

Mar 31 Balance b/f 46,540 Mar 31 Balance b/f 470

“ 31 Sales ($7,650 $7,560) (i) 90 “ 31 Purchases wrong recorded (ii) 1,800

“ 31 Balance c/f 470 “ 31 Bad debts omitted (iii) 680

“ 31 Set-off — Accounts payable (iv) 3,600

“ 31 Balance c/f 40,550

47,100 47,100

(c)

Statement of Corrected Accounts Receivable Ledger Balance as at 31 December 2010

$ $

Debit balances before adjustments 46,330

Add Sales understated (i) 90

46,420

Less Purchases wrong recorded as sales (ii) 1,800

Set-off — Accounts payable ledger (iv) 3,600

Credit balance wrongly listed as a debit balance (v) 470 (5,870)


38

The following balances were extracted from the books of Lucky Co as at 31 March 2011, the financial year-end date:

Dr Cr

$ $

Accounts receivable ledger 17,822

Accounts receivable ledger control 34,890

The reasons for the differences between the ledger and control accounts are as follows:

(ii) A debt of $300 written off as bad in the last financial year was recovered on 31 March 2011, but no entry was made in the

control account.

(iii) Goods worth $500 returned by Miss Chan were wrongly recorded in the returns outwards journal and posted to the credit

side of Miss Ng’s account in the accounts receivable ledger.

(iv) The owner took $1,000 worth of goods for private use, but the amount was recorded in the sales journal and the accounts

receivable ledger.

(v) A contra entry of $5,500 in the control account was entered on the debit side of the accounts receivable ledger control


(vi) Discounts allowed of $368 were correctly posted to the individual debtor’s account, but credited to the discounts received

column of the cash book.

39

(vii) A debit balance of $5,200 was omitted from the list of debtors’ balances and wrongly shown as a credit balance of $3,400 in

the list of creditors’ balances.

Required:

(a) Draw up the accounts receivable ledger control account.

(b) Prepare a statement to revise the total of account receivable ledger balances.

Error Type Affected Account Adjustment

(ii) Nil Nil because bad debt recovered will not affect the accounts receivable ledger

(iii) 4 Debtors Control account

(iv) 3 Debtors Account receivable

(v) Nil Cash Nil

A bank reconciliation statement is used to show the reasons for the difference between the bank balances of the cash book and the bank statement. This statement will not be disclosed to external users; it is simply an internal control tool that helps to detect errors. Note that it is not a statement to correct errors even though it may show that errors were made by the firm or the bank.

Instead of extracting the balances from the ledger, we would simply let the control account balance itself and generate its own

balances.

40

Documents

Name : Chapter 5 Control accounts (統制帳戶proxy.flss.edu.hk/~flssmcwong/S5 Notes/Chapter 5 Control accounts.pdf · receivable ledger control account, non-trade debtors ... Dr