Chapter 7 - Control Accounts

Question 1

Receivables and payables control accounts

Answer 1

Accounts in the nominal ledger in the statement of financial position showing how much we owe or are owed

Question 2

Memorandum ledger accounts

Answer 2

Receivables ledger (sales or customer ledger) and payables (purchase or supplier) ledger

Show how much is owed from each individual customer and how much it owes to a supplier

Sales invoices or purchase invoices go on the left and payments received or made (cash) go on the right

Only for credit sales and purchases, not cash

Question 3

Interaction of daybooks, memorandum accounts and nominal ledger

Answer 3

1. Sales, purchases and cash transactions are recorded in the books of prime entry
2. Individual transactions are recorded in memorandum ledger accounts
3. Day books totals posted to the nominal ledger using double entry in T accounts e.g. sales, receivables, purchases and payables and are closed off to the SoFP or p/l account

Question 4

Receivables control account

Answer 4

Using DEADCLIC tables, receivables is an asset so debits increase it and credits decrease it

Once T accounts balanced off they go to the SoFP

Question 5

Receivables control accounts - debits - increases

Answer 5

Sales
Cash refunds
Dishonoured cheques
Balance b/f

Question 6

Receivables control account - credits - decreases

Answer 6

Cash
Sales returns (credit returns)
Irrecoverable / bad debt
Contra
Balance c/f

Question 7

Payables control account

Answer 7

Using DEADCLIC it is a liability so debit decreases and credit increases

Question 8

Payables control account - debit - decreases

Answer 8

Cash paid
Purchase returns (credit)
Contra
Balance c/f

Question 9

Payables control account - credit - increases

Answer 9

Purchases (credit)
Cash refunds
Balance b/f

Question 10

Contra

Answer 10

Impacts both the receivables and payables control account (often as customer is also a supplier)

A business owes money to a supplier and the supplier owes money to the business so one may be net off against the other and settle the difference

Question 11

Contra double entry

Answer 11

Before contra
Dr - payables - x
Cr - receivables- y

Double entry for contra
Dr - payables control - reduction (lower amount of x and y)
Cr - receivables control - reduction (lower amount of x and y)

Ledger balance
Dr - payables - z
Cr - receivables - 0

Question 12

Reconciliations

Answer 12

Checking the balance on the control account with the sum of the balances on the memorandum ledgers to make sure the receivable and payable figures are correct

The balance b/f should equal the sum of balances in the memorandum sale/purchase ledger

Question 13

Control account pairs

Answer 13

Sales - receivables
Purchases - payables