Control Accounts 2020 PDF

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CONTROL ACCOUNTS Transactions are recorded in a ledger. The ledger is divided into different parts. Sales ledger or debtors’ ledger That part of the ledger which deals with credit sales and debtors/receivables is known as the Sales ledger or debtors’ ledger. Purchases ledger or creditors’ ledger That part of the ledger which deals with credit purchases and creditors/payables is known as the Purchases ledger or creditors’ ledger. Note: Both the sales ledger and purchases ledger deals with the accounts of persons that is personal accounts of debtors and creditors. PURPOSE OF CONTROL ACCOUNTS A control account is prepared in order to check the arithmetical accuracy of the total of the balances (balance c/d) in the sales and purchases ledger. Only the total of balances in the sales and purchases ledger, is used in a control account. The total of each item for the period that is total sales, purchases, returns, discounts, receipts from debtors, payments to creditors, bad debts written off and others are included in a control or total account.

Where Do the Totals for the Control Accounts Come From? Entries in the control accounts such as "total sales", "total purchases" as well as returns come from the relevant accounting journals Total account Because control accounts contain the total of balances posted as individual items to the sales or purchases ledger, it is also known as total accounts. Control account A control account therefore controls a section of the ledger. A sales ledger control account controls the sales ledger while a purchases ledger controls the purchases ledger. The balance on the sales ledger control account should equal the total of the balances in the sales ledger. The balance on the purchases ledger control account should equal the total of the balances in the purchases ledger.

Note: The total of debit entries in the sales ledger is posted as debit or LHS of the control account. The total of credit entries in the purchases ledger is posted as credit or RHS of the control account CONTRA ENTRY A contra entry is required whereby the same firm is both a supplier and a customer so that the interindebtedness is set off and shown in both the sales control and purchases control accounts. FORMAT OF CONTROL ACCOUNTS

DR

Sales ledger control Account

Total of sales ledger debit balance brought

CR

Total of sales ledger credit balance

forward from previous period Total credit sales for current period

x x

brought forward from previous period Total sales return/(returns inwards) for

x

Total refunds to credit customers Dishonoured cheques from debtors Interest charged on overdue accounts Bad debts previously written off now

x x x

the period Cash received from debtors Cheques received from debtors Discount Allowed to debtors Bad debts written off in current period

x x x x x

recovered

x Cash received in respect of bad debts x

balances in purchases ledger(contra

x

entry) Total of sales ledger debit balance at

Total of any sales ledger credit balance at end of current period carried forward

previously written off Sales ledger balances offset against

x

end of current period carried forward x xx

xx Note: 1. Cash sales are not recorded in the sales ledger control account 2. Bad debts will be recorded in a sales ledger control account.

3. Provisions for doubtful debts/allowances are not recorded in the sales ledger control account as provisions are kept in the general ledger

DR

Purchases ledger control Account

Total of purchases ledger debit balance

Total of purchases ledger credit balance

CR

brought forward from previous period

x

Total purchases return (outwards) for the period Total payments to suppliers Discount received

x x x

brought forward from previous period

x

Total credit purchases for current period

x

Refunds from suppliers

x

Interest charged by suppliers on overdue invoices

x

Purchases ledger balances offset against balances in sales ledger (contra entry)

x

Total of purchases ledger credit balance at end of current period carried forward

Total of purchases ledger debit balance at x

end of current period carried forward

xx

xx

Note: Cash purchases are not recorded in control account.

Tutorials No1

Jan 1

Sales ledger debit balance Transactions during the month of Jan:

x

1894

Ja 31

Cash received from debtors

1236

Cheques received from debtors

7284

Credit sales

10200

Bad debts written off

46

Discount allowed

50

Sales returns

200

Cash sales

150

Credit customer’s cheque unpaid

90

Sales ledger debit balance

3368

No2 Jan1

Purchases ledger credit balance

3980

Transactions during the month of Jan:

Jan31

Cheques paid to suppliers

3620

Credit purchases

4936

Discount received

45

Purchases returns

10

Cash purchases

150

Purchases ledger credit balance

5151

No3 Jul 1

Sales ledger debit balance

27971

Purchases ledger credit balance

15725

Transactions during the month of July: Cash received from debtors

150

Cheques received from debtors

35675

Credit sales

42500

Bad debts written off

450

Discount allowed

400

Sales returns

800

Credit purchases

22750

Discount received

380

Payments to creditors

19750

Purchases return

650

No4 April 1

Sales ledger debit balance Purchases ledger credit balance

8000 6250

Transactions during the month of July: Cash sales

1000

Cheques received from debtors

10300

Total sales

11000

Bad debts written off

300

Discount allowed

180

Sales returns

120

Cash purchases

250

Total purchases

6000

Discount received

100

Payments to creditors

6400

Purchases return

90

Refund of an overpayment made to a credit supplier

60

Transfer of credit balance from purchases ledger to sales ledger

100

Sales ledger debit balance

4800

Sales ledger credit balance

30

No5

Jul 1

Transactions during the month of July:

Jul 31

Cash received from debtors

150

Cheques received from debtors

7500

Credit sales

8500

Bad debts written off

325

Allowance for receivables

100

Discount allowed

225

Sales returns

650

Cash refund to customer who overpaid his account

40

Dishonoured cheques

30

Interest charged on overdue debts

50

Sales ledger credit balance

50

No6 May 1

Sales ledger debit balance

21566

Sales ledger credit balance

975

Purchases ledger debit balance

405

Purchases ledger credit balance

6210

Transactions during the month of July: Cash sales

80

Cheques received from debtors

77840

Total sales

87000

Bad debts written off

1260

Discount allowed

3120

Sales returns

4220

Cash purchases

280

Total purchases

44500

Discount received

1400

Payments to creditors

38900

Purchases return

2630

Dishonored cheques

784

Transfer of credit balance from purchases ledger to sales ledger

2640

May 31 Sales ledger credit balance Purchases ledger debit balance

800 600

No 7 The following is a list of balances relating to Pole Ltd during 2010. The company maintains a memorandum debtors and creditors ledger in which the individual account of customers and suppliers are maintained.

These were as follows:

Debit balance in debtors account 01/01/10

66,300.00

Credit balance in creditors account 01/01/10

50,600.00

Credit balance on debtors ledger

724

Goods purchased on credit

257,919.00

Goods sold on credit

323,614.00

Cash received from debtors

299,149.00

Cash paid to suppliers

210,522.00

Discount received

2,663.00

Discount allowed

2,930.00

Cash purchases

3,627.00

Cash sales

5,922.00

Bad Debts written off

3,651.00

Interest on overdue account of customers

277.00

Returns outwards

2,926.00

Return inwards

2,805.00

Accounts settled by contra between debtors and creditors ledgers

1,106.00

Credit balances in debtors ledgers 31/12/10

815.00

Debit balances in creditors ledger 31/12/10

698.00

Required:

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