Control Account Flashcards
What should be the closing balance when all the errors are corrected?
A. $128,200
B. $509,000
C. $224,200
D. $144,600
A payables ledger control account showed a credit balance of Rs.768,420. The payables ledger list totaled Rs.781,200.
Which one of the following possible errors could account in full for the difference?
- *A**. A contra against a receivables ledger debit balance of Rs.6,390 has been entered on the credit side of the payables ledger control account (by rectifying this error the control account balance will further reduce by Rs.12,780)
- *B.** The total of discounts allowed Rs.28,400 was entered to the debit side of the payables ledger control account instead of the correct figure for discounts received of Rs.15,620
- *C.** Rs.12,780 cash paid to a supplier was entered on the credit side of the supplier’s account on the payables ledger(by rectifying this error the control account balance will further reduce by Rs.25,560)
- *D.** The total of discounts received Rs.6,390 has been entered on the credit side of the payables ledger control account (by rectifying this error the control account balance will further reduce by Rs.12,780)
B. The total of discounts allowed Rs.28,400 was entered to the debit side of the payables ledger control account instead of the correct figure for discounts received of Rs.15,620
Explanation: Payable Control account balance is showing Rs. 12,780 less balance comparing with the total of the payables’ list; which means that excess amount has been debited in the control account.
The purchase day book of Humaira has been undercast by Rs.500, and the sales day book has been overcast by Rs.700. Humaira maintains payables and receivables ledger control accounts as part of the double entry bookkeeping system.
The effect of correcting these errors will be to:
- *A.** make adjustments to the ledger balances of the individual customers and suppliers, with no effect on profit
- *B.** make adjustments to the ledger balances of the individual customers and suppliers, with a decrease in profit of $1 ,200
- *C.** make adjustments to the control accounts, with no effect on profit
- *D.** make adjustments to the control accounts, with a decrease in profit of Rs.1,200
D. make adjustments to the control accounts, with a decrease in profit of Rs.1,200
Explanation:
(i) By rectifying under-casting effect of purchase daybook, the cost of goods sold will increase by Rs.500 and by rectifying over-casting effect of sales daybook the sales will decrease. Both effects are decreasing profit with Rs. 1,200
(ii) Adjustment in control is always required whenever there is a casting error occurring in books of original entries, because total sum of the books of original entries is posted to the control accounts.
In reconciling the receivables ledger control account with the list of receivables ledger balances of SF Traders, the following errors were found:
- The sales day book had been overcast by Rs.370.
- A total of Rs.940 from the cash receipts book had been recorded in the receivables ledger control account as Rs.490.
What adjustments must be made to correct the errors?
- *A.** Credit debtors control account Rs.820. Decrease total of debtors list balances by Rs.820
- *B.** Credit debtors control account Rs.820. No change in total of debtors ledger list balances.
- *C.** Debit debtors control account Rs.80. No change in total of debtors’ ledger list balances
- *D.** Debit debtors control account Rs.80. Increase total of debtors ledger list balances byRs.80
B. Credit debtors control account Rs.820. No change in total of debtors ledger list balances.
Explanation:
(i) By rectifying over-casting effect of sales daybook, the debtors control account will be credited with 370
(ii) Cash receipt has been less recorded in the debtors control account with Rs. 450, now it shall be credited in debtors control account.
The debit side of a trial balance totals $50 more than the credit side. Which one of the following could this be due to?
- *A**. A purchase of goods for $50 being omitted from the supplier’s account
- *B.** A sale of goods for $50 being omitted from the customer’s account
- *C.** An invoice of $25 for electricity being credited to the electricity account
- *D.** A receipt for $50 from a customer being omitted from the cash book
A receivables ledger control account had a closing balance of Rs.8,500. It contained a contra to the receivable ledger of Rs.400, but this had been entered on the wrong side of the control account.
What should be the correct balance on the control account?
- *A**. Rs.7,700 debit
- *B.** Rs.8,100 debit
- *C.** Rs.8,400 debit
- *D**. Rs.8,900 debit
A. Rs.7,700 debit
Explanation: Rectification of double amount Rs.800 will be posted in the credit side of receivable ledger control account that will decrease the receivable control account balance to Rs. 7,700.
A control account is a ledger account that appears in the main/general ledger, it summarises large volumes of transactions.
The debtors control account (sales ledger control account - total debtors account)
• is used to record all transactions with credit customers
• balance shows the total amount currently owed by all credit customers, this balance should agree with the list of individual balances extracted from the Sales Ledger (a memorandum ledger containing ledger accounts of individual debtors).
The creditors control account (purchase ledger control account - total creditors account).
• is used to record all transactions with credit suppliers
• balance shows the total amount currently owed to all credit suppliers, this balance should agree with list of individual balances extracted from the Purchase Ledger (a memorandum ledger containing ledger accounts of individual creditors)
Regardless of the nature of ledger account, opening Dr balance would always appear in its debit side and opening Cr balance would always appear in its credit side.
Closing balances always appear in opposite side i.e. closing Dr balance will appear in credit side and closing Cr balance will appear in Dr side.
There might be a situation that a person who is Debtor (Customer) for the entity is also a Creditor (Supplier) of the same entity with different outstanding amounts.
For example; Mohsin is Debtor with Rs.700 and Mohsin is also Creditor with Rs.500. In this case contra entry would be required to set-off these two balances. Contra entry is always recorded with lower balance of outstanding amount, in this case Rs. 500.
The contra entry would be:
Creditors Control A/c. (Mohsin) Dr. 500
Debtors Control A/c. (Mohsin) Cr 500
In case Mohsin is Debtor with Rs.700 and Mohsin is also a creditor with Rs 1,000, the contra entry would remain the same as above but the amount would then be Rs. 700 the lower one:
Creditors Control (Mohsin) Dr 700 Debtors Control (Mohsin) Cr 700
Balance as per sales ledger means the balance as per list of debtors in sales ledger, whereas balance as per sales ledger control account means the total debtors balance in the main ledger / nominal ledger.
Cr balance in Debtors account might arise because of cash received in advance.
