A LEVEL ACCOUNTING

CONTROL ACCOUNTS

The foundation for the control accounts is the double entry for credit sales and purchases
a) Sales
Debit Trade Receivables(Debtors)
Credit Sales
b) Purchases
Debit Purchase
Credit Trade Payables
These lecturing notes are biased towards correction of errors in the control accounts and
personal accounts

SALES JOURNAL AND SALES LEDGER

The sales journal is also known as the Sales Day Book. It is a list of individual debtors and
amounts of credit sales and dates on which they were made. The Sales Journal is made from
copies of the sales invoices. At the end of the month, the total sale in the journal is
transferred to the credit side of the Sales Account and the debit side of the Sales Ledger
Control Account /Debtors Control Account/ Trade Receivables Account in the General
Ledger. The source document for the sales journal is the sales invoice given to credit
customers. A Sales Ledger Account is an account which records transactions of individual
debtors. Each debtor will have an account in the Sales Ledger.

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 POSTING FROM SUBSIDIARY BOOKS TO LEDGERS
Subsidiary Books

Sales Journal Returns Inwards Journal

Cash book ( extract)
$ $
Nenyasha C 60
Nenyasha C 100 Nenyasha C 20

Brooklyn C 80 Shammah K 70 Shammah K 30

Shammah K 120 Brooklyn C 75 50

300 Sales 500

Sales Ledger

Nenyasha C Account Shammah K Account

Brooklyn C Account
Sales 100 Returns 20 Sales 120 Returns 30
Sales 80 Bank 75
Bank 60 Bank 70
Balance 5
Balance 20 Balance 20
80 80
100 100 120 120

General Ledger

Sales Account Returns inwards Account

Trade Receivables A/c
Balance 800 Debtors 300 Debtors 50 Balance 50
Sales 300 Returns 50
Bank 500
Bank 205
800 800
Balance 45
300 300

Total of the sales journal does not affect the sales ledger as shown by the postings shown in
the diagram above.
The general ledger is not affected by the sales ledger and vice versa

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 POSTING FROM SUBSIDIARY BOOKS TO LEDGERS

Subsidiary Books

Purchases Journal Returns Outwards Journal

Cash book ( extract)
$ $
CH Wholesalers 40
CH Wholesalers 60 CH Wholesalers 10
JK Suppliers 30
JK Suppliers 40 EC Reliable 20
EC Reliable 60
EC Reliable 100 Purchases 400 30

200

Purchases Ledger

CH Wholesalers Account JK Suppliers Account

EC Reliable Account
Returns 10 Purchases 60 Bank 30 Purchases 40
Returns 20 Purchases100
Bank 40 Balance 10
Bank 60
Balance 10 40 40
Balance 20
60 60
100 100

General Ledger

Trade Payables Account Returns Outwards Account

Returns 30 Purchases200 Balance 30 Creditors 30
Bank 130
Balance 40
200
200

Purchases Account

Creditors 200 Balance 600

Bank 400
600 600

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PURCHASES JOURNAL AND PURCHASES LEDGER

The Purchases journal is also known as the Purchases Day Book. It is used to record all credit
purchases of goods and it is written up from the purchase invoices. It is a list of individual
creditors and amounts of purchases and dates on which purchases were made. At the end of the
month, the total in the Purchases Journal is transferred to the debit side of the Purchases
Account and credit side of the Purchases Ledger Control Account/Creditors Control
Account/Trade Payables Account. The Purchases Ledger shows accounts of individual
suppliers from whom the business bought goods on credit. Each creditor’s account shows all the
transactions which took place during a specific period of time.

The flow of information.

 When posting the credit purchases from the journal to the Ledger: debit the Purchases
Account and credit the Creditors Control Account/ Trade Payables Account

ERRORS
1. Casting error in books of prime entry affects only control account and is therefore
rectified through control accounts. Examples may include any of the following:
(a) Sales / purchase journal overcast or under cast.
(b) Returns Journal overcast or under cast.
(c) Discounts column in cash book overcast or under cast.
EXAMPLE
Totals in the sales journal was overcast by $4 000
Explanation
The totals in subsidiary books are posted to the debit side of the sales ledger control
account not sales ledger therefore, it affects the control account only.
Rectification
Credit sales are recorded on the debit side of the sales ledger control therefore; an overcast
is corrected by a credit entry.
2. Complete omission of a transaction affects control accounts and sales / purchase
ledgers and is therefore rectifies through adjusted control accounts and debtors /
creditors reconciliation statement.
Examples may include of the following:
a) Sales / purchase invoice was entirely omitted from books.

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 b) Debit / credit note not entered anywhere.
c) Omissions of any source document affect both the control account and the sales or
purchases ledger unless told otherwise.
Example
A credit note of $150 issued to a customer was completely omitted from the books
Explanation.
This is an error of omission hence it affects all books of accounts. However, take note that
the transaction may have been recorded in the sales or purchases ledger but not in the
General Ledger or vice versa. Hence, pay special attention to the demands of the question.
Rectification
A credit note reduces the amount owed by a customer hence subtract $150 from the sales
ledger balance and credit the sales ledger control with $150
3. Errors in the personal accounts affect only the debtors / creditors and are therefore
rectified through sales or purchases ledger reconciliation statements.
Examples may include any of the following:
(a) Incorrect value of purchase / sale posted to creditors / debtors personal accounts.
(b) Correct amount entered on the wrong side of personal account.
Example
Belinda had allowed cash discount $80 to Chings, a customer . This had been entered on
the wrong side of Chings’ account but entered correctly in the cash book.
Explanation
The question clearly state that the entry was correctly recorded in the subsidiary book, the
cash book hence; it doesn’t affect the control account. An error committed in the individual
debtors account affect the sales ledger.
Rectification
A discount allowed reduces the amount owed by the business hence it should be subtracted
from the sales ledger balance
4. Incorrect amount entered on the invoice will affect control accounts and sales /
purchase ledger and is therefore rectified through adjusted control and sales or
purchases ledger reconciliation statements.
Examples may include any of the following:
(a) An invoice of $350 was incorrectly totaled as $305.
(b) An invoice of $482 was incorrectly recorded in the journal as $428.
5. An entry amounting to $500 in the sales journal was incorrectly recorded in the sales
journal as $450

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Illustration

CORRECT WRONG
Sales journal Sales journal
$ $
Senzere H 300 Senzere H 300
Musendo P 540 Musendo P 450
Chings A 700 Chings A 700
Total credit sales 1 540 Total credit sales 1 450

The control account would be undercast by $90(1540 -1540) because the totals in the sales
journals are undercast by that figure. This will also affect total credit sales.
The personal account of Musendo P will show an amount of $1450 instead of $1540

SALIENT POINTS
 An error in customers and suppliers account affect the sales and purchase‘s ledger
only
 An error in the control account will affect the control account only

SUMMARY

Type of Error Adjusted control Accounts Sales /purchases ledger

Reconciliation statements

1. Casting errors in books of YES NO

prime entry
2. Complete omission of YES YES
transaction
3. Individual error errors in NO YES
personal account
Errors in source documents YES YES

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 CLASS PRACTICE

QUESTION 1
On 30 June 2006 a schedule of debtors extracted from Coleman’s sales ledger totaled
$15400 but the balance on the Sales Ledger Control was $15816.
The following errors were found later:
a. A debtor’s balance of $345 had been omitted from the list of debtors.
b. A discount allowed of $60 had been correctly recorded in the cash book but entered in
the
customer’s account as $6.
c. The sales return day book had been under cast by $250.
d. A credit note of $150 issued to a customer was completely omitted from the books.
e. The discount allowed column in cash book was over cast by $125.
REQUIRED:
1. Starting with original total, make the necessary adjustment to the schedule of debtors.
2. Stating with the original balance, prepare a revised Sales Ledger Control Account.

QUESTION 2
On 28 February 2006 a schedule of creditors extracted from Saab’s purchase ledger totaled
$14042 but the balance on the purchase ledger control account was $14200.
The following errors were found later:
a. The purchase return day book had been under cast by $240.
b. Purchase of goods on credit $1320 had not been entered anywhere in the accounts.
c. Ahmed’s credit balance of $150 had been omitted when the purchase ledger balance had
been
listed.
d. Ahmed had allowed cash discount $80 to Saab. This had been entered on the wrong side
of
Ahmed’s account but entered correctly in the cash book.
e. The purchase returns day book showed that a credit note for $180 had been received
from Elisa but it had been entered in Elisa’s account as $108.
REQUIRED:
1. Starting with original total, make the necessary adjustment to the schedule of creditors.
2. Stating with the original balance, prepare a revised Purchase Ledger Control Account.

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 QUESTION 3
The following information has been taken from the books of Bob Williams for the financial
year ended 30 June 2004.

Sales ledger balances at 1 July 2003 62 540

Cash received from debtors 212 390
Discount allowed 3 470
Return inwards 4 820
Cash sales 58 330
Bad debts written off 1 960
Credit sales for the year 249 490
Debit balances transferred to purchase ledger accounts 3 410

The total of Bob Williams’s sales ledger balances amounts to $80080 which does not agree
with the closing balance in the sales ledger control account. The following errors have been
discovered.
a. A debtor balance of $930 was omitted from the list of debtors.
b. Return inwards journal was under cast by $870.
c. C-Donald had returned goods worth $540 but this sum was recorded as $450 in his
account.
d. Discount allowed $270 had been posted to the wrong side of debtors account.
e. A debtor was charged with $80 interest but it was overlooked by the accountant.
f. Sales day book had been over cast by $1360.
g. Bad debts of $190 is entered in the control account but is not posted to the customer’s
account.
h. Discount allowed of $350 had been entered in the cash book but is not entered in the
customer’s account.
i. Return inwards $440 from B-Jones had not been recorded in the books.
j. B-Hertz was both a customer and a supplier. He had a balance of $270 in the purchase
ledger
and $190 in the sales ledger. The contra entry was made in B-Hertz’s account but no entry
was
made in the control account.
k. A sales invoice of $1490 was not entered in the books.
l. A credit sale of $1860 to C-Nelson was entered on the credit side of his account.
REQUIRED
1. From the original list of balances, draw up the sales ledger control account for the year
ended 30 June 2004.
2. Show the amendments to be made to the control account.
3. Draw up a statement amending the total of the sales ledger balance to agree with the
new control account balance.

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 QUESTION 4
The following information has been taken from the books of Mark Edison for the financial
year ended 30 September 2004.
Sales ledger balances at 1 October 2003 82 514
Credit sales for the year 297 617
Cash sales 98 242
Bad debts written off 3 821
Return inwards 7 826
Cash received from debtors 252 319
Discount allowed 6 681
Interest charged to customers 1 445
Debit balances transferred to purchase ledger accounts 2 972

The total of Mark Edison’s sales ledger balances amounts to $104447 which does not agree
with the closing balance in the sales ledger control account. The following errors have been
discovered.
a. C Reid had returned goods worth $710 but this sum was recorded as $170 in his account.
b. Sales Day Book had been under cast by $880.
c. A credit sale of $2720 was entered on the credit side of R Baker’s account.
d. Return inwards $1240 from T Bailey had not been recorded in the books.
e. A debtor balance of $1530 was omitted from the list of debtors.
f. Return inwards Journal was under cast by $580.
g. Discount allowed $360 had been posted to the wrong side of debtor’s account.
h. A debtor was charged with $170 interest but it was overlooked by the accountant.
i. Bad debts of $220 is entered in the control account but is not posted to the customer’s
account.
j. K Fred was both a customer and a supplier. He had a balance of $920 in the purchase
ledger and $1120 in the sales ledger. The contra entry was made in the control account but
no entry was made to K-Fred’s account.
k. A sales invoice of $1770 was not entered in the books.
l. Discount allowed of $760 had been entered in the cash book but is not entered in the
customer’s account.
REQUIRED
1. From the original list of balances, draw up the sales ledger control account for the year
ended 30 September 2004.
2. Show the amendments to be made to the control account.
3. Draw up a statement amending the total of the sales ledger balance to agree with the
new
control account balance.

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 QUESTION 5
On 30 June 1999 Donald listed the balances contained in his sales ledger. These balances
totaled $18040 but on the same date the balance of the sales ledger control account was
$18910. After investigation the following errors were found.
a. A debtor balance of $490 had been counted in total credit sales but had not been posted
to the customer’s account.
b. Discount allowed of $60 had been entered in the cash book but it is not entered in the
customer’s account.
c. Return inward journal was over cast by $120.
d. Returns of $170 from B-Peter had not been recorded in the books.
e. C-John was both a customer and a supplier. His purchases ledger balance of $260 has
been set-off against his sales ledger balance in the control account but nothing had been
recorded in the customer’s account.
f. Sales day book had been over cast by $460.
g. A debtor account was charged with $20 interest but it was not recorded in the control
account.
h. M-Charles returned goods worth $280 but this sum was recorded as $820 in his account.
i. A debt of $110 had proved bad but no entry had been passed in the books.
j. Discount allowed of $80 had been posted to the debit side of M-Druid’s account.

REQUIRED
1. Write up the sale ledger control account.
2. Prepare a statement showing the reconciliation of the original total of the sales ledger
balances with the amended sales ledger control account balance.

QUESTION 6
On 31 December 1999 Smithson listed the balances contained in his sales ledger. These
balances totaled $16980 but on the same date the balance of the sales ledger control
account was $18180.
After investigation the following errors were found.
a. A debtor account was charged with $70 interest but it was not recorded in the control
account.
b. A debtor balance of $740 had been counted in total credit sales but had not been posted
to the customer’s account.
c. C-Donald was both a customer and a supplier. His purchases ledger balance of $440 has
been set-off against his sales ledger balance but this has not been recorded in the control
account.
d. A debt of $390 had proved bad but no entry had been passed in the books.
e. Sales day book had been over cast by $550.
f. Return inward journal was over cast by $110.
g. Discount allowed of $170 had been entered in the cash book but it is not posted to the
customer’s account.

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h. Discount allowed of $80 to C-Berry had not been recorded in the books.
i. C-Rhodes returned goods worth $310 but this sum was recorded as $130 in his account.

REQUIRED
1. Write up the sale ledger control account.
2. Prepare a statement showing the reconciliation of the original total of the sales ledger
balances with the amended sales ledger control account balance.

QUESTION 7
On 31 October 1999 Duke listed the balances contained in his sales ledger. These balances
totaled $15270 but on the same date the balance of the sales ledger control account was
$14790. After investigation the following errors were found.
a. Returns of $80 from S-Lee had not been recorded in the books.
b. Sales day book had been under cast by $260.
c. A debtor balance of $560 had been counted in total credit sales but had not been posted
to the customer’s account.
d. R-Stare was both a customer and a supplier. His purchases ledger balance of $320 has
been set-off against his sales ledger balance in the control account but nothing had been
recorded in the customer’s account.
e. A debtor account was charged with $40 interest but it was not recorded in the control
account.
f. Discount allowed of $70 had been entered in the cash book but it is not entered in the
customer’s account.
g. B-Howard returned goods worth $740 but this sum was recorded as $470 in his account.
h. A debt of $210 had proved bad but no entry had been passed in the books.
i. Discount allowed of $120 had been posted to the debit side of C-Trevor’s account.
j. Return inward journal was under cast by $160.

REQUIRED
1. Write up the sales ledger control account.
2. Prepare a statement showing the reconciliation of the original total of the sales ledger
balances with the amended sales ledger control account balance.

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 QUESTION 8

The partnership firm decided to maintain control accounts as a way of improving internal
control system. The total of the balances in the partnership Sales Ledger at 30 June 2004
amounted to $81 800 which does not agree with the closing balance on the control account.
The following data is available from the books of the partnership for the year ended 30
June 2004
Sales Ledger balances at 1 July 2003 20 160
Credit sales for the year 942 240
Credit sales returns 11 320
Cash and cheques received from credit 852 880
customers
Cash sales 8 540
Interest charged on customers’ overdue accounts 6 680
Bad debts recovered during the year 2 420
Debit balances transferred to the Purchases 7 560
Ledger
Bad debts written off 4 620
Discount allowed to credit customers 5 640

Investigations revealed the following errors:

i. The total of the discount allowed column in the Cash Book is understated by $2 000.
Totals of subsidiary books (cash book) affect the control account only. Discount
allowed is shown on the credit side of the control account; hence we credit it in the
control account to top-up amounts of discounts.
ii. A credit sale of $3 560 had been recorded in the Sales Journal as $3 650.
A sales item overcast IN THE SALES JOURNAL affect both the sales ledger ( would be
extracted from the sales journal to the personal account of the customer concerned in
the sales ledger) and then control account because it would overcast the totals of the
subsidiary book. Sales are shown on debit entry in the control hence overcast is
credited. The same figure is subtracted from the sales ledger balance.
iii. A Sales Ledger account had been overstated by $2 400.
This error affect sales ledger only, this is because, all things equal, nothing is extracted
from the ledger to the control account. Rectify this error by subtracting from the sales
balance
iv. A debit balance of $420 had been set off against a balance in the Purchases Ledger
but no entry had been in the control account for this item.
Rectify by recording this item on the credit side of the control account
v. A debit balance of $6 420 had been omitted from the schedule of debtors.
A schedule of debtors or a list of debtors is the sales ledger hence add this omitted
balance to the sales ledger balance
vi. The total of a page in the Sales Journal was carried forward as $4 500 when the correct
amount was $5 400.
Totals of subsidiary books affect the control accounts only. The total of the sales
journal is transferred to the debit side of the control account. Since it is an undercast, a

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 debit entry rectifies the anomaly.
vii. A receipt of $1 240 had been recorded in the Bank Account but omitted from the
customer’s account.
Customers are found in the sales ledger hence, the error should be fixed in the sales
ledger; a receipt from a debtor reduces the total balances from the sales ledger.
viii. A debtor owing $960 had been declared bankrupt. The customer’s account was
closed but this debt had not been written off in the control account.
Bad debts are recorded on the credit side of the control account
ix. A debit balance of $2 420 was omitted from the list of debtors

Question 2
a) Draw up a Sales Ledger Control Account for year ended 30 June 2004 before the
errors are discovered. [9]
b) Starting with the balance brought down in your answer to a), prepare an
amended Sales Ledger Control Account and balance it off. [9]
c) Draw up a statement reconciling the amended Sales Ledger Control Account
balance with the total of the Sales Ledger. [5]
d) Explain the purpose of control accounts and outline the benefits that accrue from
maintaining a control account system.

Lecturing Notes- Awakening The Mind Control Accounts A Level @Chings 0772705459
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