Theory question 108
Control AccountsOn 1st October, 2007, the debtors' ledger balances of Abubakar Ltd. were Le 80,240 debit and Le 570 credit. The creditors ledger balances were Le 62,350 credit and Le 1,050 debit.
For the year ended 30th September, 2008, the following information were available: (Le)
Credit sales: 637,280
Credit purchases: 399,740
Cash received from debtors: 552,120
Cash paid to creditors: 373,070
Discounts received: 14,750
Discount allowed: 23,280
Bills received: 40,570
Bills dishonoured: 2,630
Returns inwards: 10,020
Returns outwards: 5,350
Bad debts written off: 3,260
Cash received in respect of debit balances in creditors ledger: 1,050
Amount due from a customer in debtors ledger set off against amount due to him in creditors ledger: 4,340
Cash received in respect of debit previously written off as bad: 940
Allowances to customers on goods damaged in transit: 2,120
On 30th September, 2008, there were no credit balances in the debtors ledger except those outstanding on 1st October, 2007 and there were no debit balances in the creditors ledger.
You are required to prepare: (a) Debtors Control Account, and (b) Creditors Control Account.
Show the model answer
(a) Debtors Control Account: Dr balance b/d 80,240; credit sales 637,280; bills dishonoured 2,630; bad debt recovered 940; balance c/d (credit balances) 570 = Le 721,660. Cr balance b/d 570; cash 552,120; discount allowed 23,280; bills receivable 40,570; returns inwards 10,020; bad debts 3,260; set-off to creditors control 4,340; cash for debt recovered 940; allowances 2,120; balance c/d Le 84,440 = Le 721,660
Balances b/d: Dr Le 84,440, Cr Le 570 (the 940 recovered may be left out of both sides; the closing debit balance is the same)
(b) Creditors Control Account: Dr balance b/d 1,050; cash paid 373,070; discount received 14,750; returns outwards 5,350; set-off from debtors control 4,340; balance c/d Le 64,580 = Le 398,560 + 64,580 = Le 463,140. Cr balance b/d 62,350; credit purchases 399,740; cash received 1,050 = Le 463,140
Balance b/d Cr Le 64,580
Set-offs (contra) appear in both control accounts; closing credit balances in the debtors ledger go on the debit side as balance c/d.