Control accounts | Accounting

The purpose of the control account is to keep the general ledger nice and clean without any details, yet contain the correct balances to be used in the financial statements. 

Question:

The following information related to Mr. William for the year ended 30 September 2005:-

$

Interest charged to debtors

326

Carriage charged to debtors

3,290

Cash purchases

12,735

Returns inwards

1,938

Bad debts written off

853

Cheque payments to suppliers

64,320

Discount received

1,717

Allowance to debtor for damaged goods

500

Cash sales

76,321

Debtor’s cheques dishonoured

2,639

Purchases Returns

1,222

Credit sales

132,845

Discount allowed

3,699

Transfer of debit balance in Sales Ledger to Purchases Ledger

2,850

Credit purchases

70,394

Cheques received from debtors

144,820

144,820

Debit balances in Purchases Ledger at 30 September 2005

563

Credit balances in Sales Ledger at 30 September 2005

2,154

Provision for Doubtful debts

4,500

Balances in the books of Mr William at 1 October 2004:

Sales Ledger Debit : $43,628

Credit:                     $1,240

Purchases Ledger

Debit:  $324

Credit :$24,695

Required:

(a) Prepare the Purchases Ledger Control Account and Sales Ledger Control Accounts as they would appear in the General Ledger of Mr William for the year ended 30 September 2005 ( 18 marks)

(b)  Prepare a Balance Sheet extract showing Trade Debtors and Trade Creditors at 30 September 2005 (7 marks)

(a) Purchases Ledger Control Account

2004

$

2004

$

Oct 1

Balance b/d

324

Oct 1

Balance b/d

24,695

2005

2005

Sept 30

Bank

64,320

Sept 30

Credit purchases

70,394

Discount received

1,717

Balance c/d

563

Returns outwards

1,222

Contra

2,850

Balance c/d

25,219

95,652

95,652

Oct 1

Balance b/d

563

Oct 1

Balance b/d

25,219

Sales Ledger Control Account

2004

$

2004

$

Oct 1

Balance b/d

43,628

Oct 1

Balance b/d

1,240

2005

2005

Sept 30

Interest charged to debtors

326

Sept 30

Returns inwards

1,938

Allowance of damaged goods

500

Carriage charges

3,290

Discount allowed

3,699

Credit sales

132,845

Contra

2,850

Dishonoured cheques

2,639

Bank

144,820

Balance c/d

2,154

Bad debts

853

Balance c/d

28,982

184,882

184,882

Oct 1

Balance b/d

28,982

Oct 1

Balance b/d

2,154

(b) Mr William

Balance Sheet As At 30 September 2005

Current Assets

Trade debtors ($28,982-$2,154) $26,828

Less: Provision for doubtful debts $4,500

                                               $22,328

Current Liabilities

Trade creditors ($25,219-$563)   $24,656