Debtors and Creditors Control a/cs

Question 1

Advantages of Control a/cs to a firm

Answer 1

• to act as a check on the accuracy of the ledgers
• to locate errors quickly and narrow searching of errors to confined areas
• to find credit sales or credit purchases from incomplete records
• allow amounts owed by debtors and amounts owed to creditors to be ascertained quickly

Question 2

Books of first entry used in the production of debtors/creditors control a/cs

Answer 2

• sales
• sales returns
• general journal
• cash book (receipts and payments)

Question 3

What a different balance in the control a/c and schedule of debtors/creditors means

Answer 3

• errors in the control a/c or the schedule but not both
• failure to complete the double-entry
• errors in the ledgers
• incorrect totalling of the day books

Question 4

What a credit balance in a debtors a/c means

Answer 4

• debtor paid for goods in full and then returns some/all
• debtor paid for goods in full and then receives discount
• debtor overpays

Question 5

What a debit balance in a creditors a/c means

Answer 5

• creditor is paid for goods in full, then some/all are returned
• creditor is paid in full, then a discount is received
• creditor is overpaid

Question 6

Contra Item

Answer 6

An offset of a debtor against a creditor where the debtor and creditor are the same person/business

Question 7

Limitations of control a/cs

Answer 7

1. do not identify which ledger a/c may contain the error

2. some errors are not revealed by ctrl a/c, e.g. commission, omission, compensating, original entry