MARYKNOLL SECONDARY SCHOOL
Principles of Accounts
13 Control Accounts
A Control Account is an account in which the total amounts are debited and credited. A
Sales Ledger Control Account and a Purchases Ledger Control Account must be created to
act as ‘total debtors’ and ‘creditors’ accounts respectively. The items from the original entry
book are posted to the individual ledger accounts in the usual way, but the total is posted to
the control account.
At the end of a period, the balance on the control account will be
equal to the sum of balances on the ledger accounts.
Example:
The following extracts have been taken from the subsidiary books of the business owned by C.
Chow for the month of June 2003:
Date
Jun 3
7
17
24
30
Date
Jun 14
Jun 29
30
Purchase Day Book
Particulars
Amount ($)
480
270
410
650
?
W. Au
K. Mok
T. Sang
F. Wong
Transfer to Purchases A/C
Returns Outwards Day Book
Particulars
W. Au
T. Sang
Transfer to Returns Outwards A/C
Amount ($)
50
80
?
Cash Book (credit side)
Date
Jun 9
Jun18
Jun24
Jun27
Jun30
Discounts
Received
$
30
5
20
18
?
Particulars
T. Sang
F. Wong
K. Mok
W. Au
Total
Bank
$
690
195
290
322
?
It should be noted that the balances in the accounts of Chow’s creditors on 1 June 2003 were
as follows:
W. Au $360,
K. Mok $140
T. Sang $720
F. Wong $310
Required:
(i)
Prepare all the creditors’ accounts in Purchases Ledger
(ii)
Prepare the Purchases Control Ledger
1
Exercise 1
Prepare a purchases ledger control account from the following.
As the final figure of
purchases ledger balances at 30 November is missing, you will have to deduce that figure.
2004
Nov 1
Purchases ledge balances
Total for November:
Discounts received
Returns outwards journal
Cash and cheques paid to creditors
Purchases journal
30 Purchases ledger balances
$
7,560
240
355
9,850
11,100
?
Exercise 2
Prepare a sales ledger control account from the following:
2005
May 1
Debit balance
Total for May:
Sales journal
Cash and cheques received from debtors
Discounts allowed
Debit balances in the sales ledger set off against credit balances
in the purchases ledger
31 Debit balances
31 Credit balances
$
6,420
12,800
10,370
395
145
?
50
Exercise 3
The trial balance of Drums Ltd. revealed a difference in the books. In order that the error(s)
could be located, you are required to prepare the sales ledger and the purchases ledger control
account from the following information:
2006
Jan 1
Purchases ledger balances
Sales ledger balances
Total for the year 2006
Purchases journal
Sales journal
Returns Outwards journal
Return Inwards journal
Cheques paid to suppliers
Petty cash paid to suppliers
Cheques and cash received from customers
Discount allowed
Discount received
Balances on the sales ledger set off against balances in the purchase ledger
2
$
11,874
19,744
154,562
199,662
2,648
4,556
146,100
78
185,960
5,830
2,134
1,036
Exercise 4
The trial balance of Tai Po Company on 31 December 1998 did not agree. To locate the
error, you are required to prepare the sales ledger and the purchases ledger control account
from the following information:
$
1 January 1998 Sales ledger balances
11,700 Dr.
250 Cr.
Purchases ledger balances
8,500 Cr.
200 Dr.
1 January 1998 Credit sales
26,570
to
Credit purchases
15,980
31 December 1998 Sales returns
430
Purchases returns
290
Cash received from debtors
17,650
Bills accepted by debtors
10,000
Cash paid to creditors
13,420
Discount allowed
760
Discount received
880
Interest charged to debtors
110
Bills dishonoured
70
Sales ledger balances (Dr.) transferred to purchases ledger
140
Bad debts written off
80
31 December 1998 Sales ledger balance
200 Cr.
Purchases ledger balance
150 Dr.
Exercise 5
On 1 April 1995, the balances of the debtors and creditors control accounts in the books of
Diamond Limited were $68 886 and $46 920 respectively. The following summary of
transactions are for the month of April 1995.
$
Bad debts
270
Bills receivable dishonoured
2 363
Cash sales
3 060
Amount due from customers settled by contra with their accounts in
the purchases ledger
396
Cash received from debtors
61 848
Returns outwards
350
Discounts allowed
1 107
Bills payable to creditors
5 490
Bills receivable from customers
5 625
Credit sales
57 780
Interest charged on overdue customers’ accounts
180
Cash paid to creditors
40 612
Credit purchases
33 330
Cash purchases
570
Bad debts recovered (included in cash received from debtors)
114
Discounting charges on bills receivable
76
Carriage inwards
127
3
Exercise 6
On 30 November 1985, the accountant of Bright Ltd. received the following monthly
summaries from his assistant:
1985
Nov 1
30
Sales ledger control account balance
Sales day book
Returns inwards book
Cheques received from debtors
Cash received from debtors
Discounts allowed
Bad debts written off
Dishonoured cheques
Interest charged on debtors’ overdue accounts
Balances in sales ledger offset against credit
balances in purchases ledger
$
23,450
456,200
3,280
400,500
2,000
3,240
560
1,860
85
2,150
After recording all the above information in the sale ledger control account, the accountant
found that the balance derived did not agree with the total of the sales ledger balances, which
amounted to $69,055.
On investigating the matter further, the following errors were revealed:
A discount allowed of $60 had been debited by mistake to John’s account.
The balance on Mary’s account had been overstated by $180.
A sale of $500 had been omitted from the sales day book.
The balance of the sales ledger control account as at 1 November 1985 should have been
$23,540.
(e) The sales day book had been overcast by $1,200
(f) In November 1985, Johnson, one of the Company’s debtors, repaired some of the
Company’s furniture. It had been agreed that the service charges of $300 were to be
paid by deducting his account directly. However, no entry for this was made.
(a)
(b)
(c)
(d)
Required:
(i)
Write up the sales ledger control account for the month of November 1985 based on
the information provided by the accountant’s assistant.
(ii)
Adjust the sales ledger control account to the correct balance on 30 November 1985.
(iii) Reconcile the total of the sales ledger balances with the correct balances of the control
account.
4
Exercise 7
At the end of the accounting year, a bookkeeper discovered that the net total of the balances
extracted from the purchases ledger, which was $87,345, did not agree with the balance
shown by the purchases ledger control account. The following errors were found and after
adjustments had been made, the books balanced:
(a) An item of $683, being purchases from A. Wong, had been posted from the purchases
day book to the credit of L. Wong’s account.
(b) Credit balances on the purchases ledger amounting to $329 and debit balances
amounting to $583 had been omitted from the list of balances.
(c) The purchases day book had been undercast by $217.
(d) Goods costing $1,386 had been returned to P. Tam and his account debited for the goods
returned to him, but no other entry had been made.
Required:
(i)
Give the journal entries necessary to correct these errors
(ii)
Calculate the balance of the purchases ledger control account:
- After the corrections
- Before the corrections
Exercise 8
The net total balances extracted from the sales ledger of a trading firm on 31 December 1989
amounted to $56,974, which did not agree with the balance on the sales ledger control
account. The following errors were discovered:
(a) A debit balance of $754 on the personal account of a trade debtor was omitted from the
list of sales ledger balances.
(b) Discount allowed, amounting to $86, was credited to the personal account of a trade
debtor, but was not entered anywhere in the books.
(c) The sales journal was overcast by $2,100.
(d) A sales invoice for $3,820 was entered twice in the sales journal and posted twice to the
personal account of the customer.
(e) A sales invoice for $2,760, entered in the sales journal, was not posted to the trade
debtor’s personal account.
After making the corrections, the books agreed.
Required:
(i)
Calculate the revised total of the sales ledger balances.
(ii)
Set out the sales ledger control account showing the balance before the correction of
errors and the necessary adjustments.
5
Exercise 9
Mr. Ho, the accountant of a trading firm, drew up the sales and purchases ledger control
accounts on 31 March 1993. But he found that the balances shown below did not agree with
the totals of the two ledgers.
$
Sales ledger control account
4,250
Purchases ledger control account
2,380
On investigation, the following information was discovered:
(a) The purchases day book was overcast by $560.
(b) A sales invoice had been undercast by $20
(c) Goods purchased from John valued at $920 had been recorded as a sales to Johnson in
the sales day book.
(d) Mr. E. So, who had long been the main supplier, had a closing balance of $1,390.
Recently, he made purchases from the company and an account with a balance of $360
was maintained in the sales ledger. It was decided that only one account should be kept
in the books.
(e) The total of the purchases ledger was overstated by $620.
Required:
(i)
Draw up the sales ledger control account and the purchases ledger control account to
find out their correct balances.
(ii)
Prepare a statement to ascertain the total of the purchases ledger before corrections.
Exercise 10
The total balances extracted from the sales ledger of a trading firm on 31 December 1996
amounted to $25,374, which did not agree with the balance of $24,801 on the sales ledger
control account. The following errors were subsequently discovered:
(1) Discounts allowed had been correctly posted to individual debtors’ accounts, but had
been over-added by $300 in the discount column in the cash book.
(2) A credit balance of $637 on one debtor’s account had been included in the debtors’
schedule as a debit balance.
(3) A sales invoice for $425 was entered twice in the sales journal and posted twice to the
personal account of a debtor.
(4) A bad debt recovery of $150 had been correctly recorded in the debtor’s account, but no
entries had been made in the control account.
(5) A cheque for $2,567 received from a customer had been posted to his account as $2,576.
(6) The credit side of one debtor’s account had been over-added by $100.
(7) The sales journal was overcast by$892.
Required:
(i)
Draw up the Sales Ledger Control Account to find out the correct balance
(ii)
Prepare a Statement showing the revised total of Sales Ledger balances
6
Exercise 11
The balances extracted from the books of Maria Ltd. at 31 December Year 7 are as follows:
Sales ledger
Sales ledger control
Purchases ledger
Purchases ledger control
209,770
332,700
226,700
323,500
The reasons of the differences between the ledger and control accounts are listed as follows:
1.
Goods returned $15,800 by a debtor were entered in the general ledger only.
2.
Discounts received of $16,800 in the cash book was only posted in the purchases ledger.
3.
Balance in the sales ledger amounting to $7,690 was mistakenly carried forward as
7,960.
4.
A debtor, Wonderful Company, only paid $35,000 for the full settlement of his debt of
$100,000 but Maria omitted to write off the outstanding balance in its account.
5.
A contra of $40,000 in the control account was entered on the debit side of the sales
ledger control account and the credit side of the purchases ledger control account.
6.
Sales in the control account were $163,900 of which $124,000 were cash sales.
Required:
(i)
Correct the control accounts in the general ledger.
(ii)
Prepare a statement of adjustments for the Sales Ledger balance.
7
Exercise 12
The following information, presented by an inexperienced book-keeper, related to Mobile
Limited for the year ended 31 March Year 7:
Purchase Ledger Control
Year 6
$
Year 6
Apr 1 Balance b/d
3,940 Apr 1 Balance b/d
Year 7
Year 7
Mar 31 Bank
1,853,600 Mar 31 Purchases
Discounts received
1,4890
Cash refunds
Sales ledger control (contra)
7,950
Returns outwards
Balance c/d
254,520
Balance c/d
2,134,900
Apr 1
Balance b/d
Year 6
Apr 1 Balance b/d
Year 7
Mar 31 Sales
Debt collection fees
Returns inwards
Balance c/d
Apr 1
Balance b/d
2,080 Apr 1
Balance b/d
Sales Ledger Control
$
Year 6
265,760 Apr 1 Balance b/d
Year 7
2,581,240 Mar 31 Discounts allowed
1,970
Bad debts
32,860
Bank
3,040
Balance c/d
2,884,870
434,300 Apr 1
Balance b/d
$
219,660
1,878,520
6,240
28,400
2,080
2,134,900
254,520
$
4,150
19,200
25,620
2,401,600
434,300
2,884,870
3,040
At 31 March Year 7 the lists of individual debtor and creditor balances showed the following
totals:
Debit balances
Credit balances
$
$
Purchases Ledger
2,080
207,220
Sales Ledger
353,460
3,040
The following information was later discovered:
(1)
(2)
(3)
(4)
(5)
(6)
The company received notice of the dishonouring of a cheque for $4,860. This was
correctly entered in the Cash Book but not posted to the personal account of the
customer.
The Purchases Day Book had been undercast by $6,000.
No entries had been made in the Sales Ledger in respect of the debt collection fees.
A debit balance of $5,200 had been omitted from the list of debtor balances and wrongly
shown as a credit balance of $2,500 in the list of creditor balances.
The Returns Outwards Book had been overcast by $1,000.
A customer with a balance of $7,950, settled by contra. This had been recorded
correctly in both personal ledgers, but only in the Purchase Ledger Control Account.
Required:
(a) Prepare a statement showing the adjustments required to the listing of both Purchases
Ledger and Sales Ledger balances, including the revised totals.
(b) Revise the Purchases Ledger and Sales Ledger Control Account.
8