5. Control accounts Flashcards
What is trade receivable control account?
It is an account which summarises the transactions a business has with all its credit customers.
In which ledger is trade receivable control account kept?
General ledger
What is trade payable control account?
It is an account which summarises the transactions a business has with all its credit suppliers.
In which ledger is trade payable control account kept?
General ledger
State the source of information for the following items found in trade receivable control account:
a) Sales revenue
b) Sales returns
c) Cash at bank (receipts)
d) Discount allowed
e) Allowance for impairment of trade receivables
a) Sales Journal
b) Sales Returns Journal
c) Cash Book
d) Cash Book
e) General Journal
State the source of information for discount allowed withdrawn and dishonoured cheques recorded in the Trade Receivable Control account
Discount allowed withdrawn - General Journal
Dishonoured cheque - Cash Book
State the source of information for the following items found in trade payable control account:
a) Inventory (purchase)
b) Inventory (returns)
c) Cash at Bank (payments)
d) Discount received
a) Purchases Journal
b) Purchases Returns Journal
c) Cash Book
d) Cash Book
State two purposes of preparing control accounts.
- It serves as a tool to check on entries made in the sales and purchases ledger.
- It provides a summary of transactions between business and its trade payables and its trade receivables.
State two advantages of keeping control accounts.
- It cuts down the number of accounts kept in the general ledger (since the individual receivable and payable accounts are kept in sales and purchases ledger).
- It allows division of duties and thus internal control is possible.
- It gives an overview of events which is useful for decision making.
Explain transfer between trade receivable and trade payable accounts.
When a credit customer is also a credit supplier, there will be two accounts belonging to the same person - one as a trade receivable, the other as a trade payable. It is useful to transfer the balance in one account to the other.to the other account so that one account can be closed. This is termed “contra”. The lower balance is transferred out so that the balances in both accounts are reduced; one of them to zero.
Give the double entry to contra debt of $500 in the control accounts.
Dr Trade Payable Control $500
Cr Trade Receivable Control $500
Identify which of the following items appear in the trade receivable control account:
a) Cash sales revenue
b) Credit sales revenue
c) Sales returns
d) Cheques from credit customers
e) Cheques from cash customers
f) Dishonoured cheques
g) Discount allowed
h) Impairment loss on trade receivables
i) Discount received
a) Cash sales revenue - NO
b) Credit sales revenue - YES
c) Sales returns - YES
d) Cheques from credit customers - YES
e) Cheques from cash customers - NO
f) Dishonoured cheques - YES
g) Discount allowed - YES
h) Impairment loss on trade receivables - NO
i) Discount received - NO
Identify if the following appears in TP control or TR Control
a) Invoices issued
b) Invoices received
c) Credit notes received
d) Debit notes issued
e) Dishonoured cheques
f) Offset from sales ledger to purchases ledger
g) Discount allowed
h) Discount received
a) Invoices issued - TR control
b) Invoices received - TP Control
c) Credit notes received - TP Control
d) Debit notes issued - TR Control
e) Dishonoured cheques - TR Control
f) Offset from sales ledger to purchases ledger - both
g) Discount allowed - TR Control
h) Discount received - TP Control
Cheryl has the following TP and TR accounts:
TP John $500 TR John $100
TP David $200 TR Enid $520
TP Lester $110 TR Lester $400
If Cheryl were to offset her TP and TR balances, what would be the amount and the entries needed in the control accounts?
Dr TP Control $210
Cr TR Control $210
[Reason: Close TR John $100; Close TP Lester $110]
What is another name for TR Control?
What is another name for TP Control?
TR Control aka Sales Ledger Control or Total TR account
TP Control aka Purchases Ledger Control or Total TP account.
