CONTROL

ACCOUNTS
Course: Financial Accounting
Instructor: Sir Shafa Attaullah
Submitted by: Saddam Hussain
Semester: BBA 2 Years Bridging
ID: BUS-24S-224
Q#1
JR's sales ledger control account balances at 1 March 2008 were as follows.

Dr $340 600 Cr $1 960

During March 2008 the following transactions took place.

$
Credit sales 295 000
Cash sales 219 750
Sales returns from credit customers 6 480
Receipts from debtors 238 600
Discounts allowed 3 500

Additional information for the month of March 2008

1 The receipts from debtors included a cheque for $3600 in full settlement of a debt
of $3800. This was returned by the bank on 28 March marked "insufficient funds".

2 Eva Little and JR both buy from and sell to each other. At 31 March 2008 Eva owed
JR $5000 and JR owed $8600 to Eva. They agreed to offset balances, the net
amount being payable by JR on 31 March 2008.

3 It was agreed that a debt of $2300 from Alice Springs was bad and it was written
off.

4 The total credit balances in the sales ledger control account at 31 March 2008 were
$8340.
 Required
(a) Prepare JR's sales ledger control account for the month of March 2008.

Sales Ledger Control Account

1-mar-2008 Balance b/d 340600 Balance b/d 1960
Cheque Returned 3600 Sales Returned 6480
Credit Sales 295000 Receipts from Debtors 238600
Discount Allowed 3500
Bad Debt written off 2300
setoff with Eva 5000
31-mar-2008 Balance c/d 8340 Balance c/d 389700
647540 647540

(b) State three possible reasons why a debtor's account might have a credit
balance.

➢ Overpayment by the Debtor: The debtor might have made a payment greater than the
outstanding balance on their account. This could happen due to a clerical error or if the
debtor decided to pay in advance for future transactions.
➢ Returns and Allowances: If the debtor returns goods after making a payment or if the
company issues a credit note for allowances or discounts after the debtor has already
paid the invoice, this can result in a credit balance.
➢ Offsetting Balances: In cases where there are mutual transactions between the debtor
and the company (e.g., the debtor is also a supplier to the company), balances might be
offset against each other, leading to a credit balance in the debtor's account. This is
especially common in situations where goods are returned, or when there are
adjustments for contra entries between sales and purchases.

(c) State three reasons for keeping control accounts.

➢ Error Detection: Identifies and corrects discrepancies between subsidiary
ledgers and the general ledger.
➢ Simplified Reporting: Summarizes transactions for easier financial statement
preparation.
➢ Internal Control: Enhances fraud prevention by segregating duties and
increasing oversight.
 Q# 2
Marcel owns a wholesale business supplying shops, hotels and restaurants with tea and coffee. He does
not keep formal accounting records but is able to supply the following information for the year ended 30
April 2011.

30 April 2011 1 May 2010

$ $
Trade receivables 17 000 18 200
Trade payables 14 800 16 600
Inventories 20 600 33 000
Wages accrued 9 350 9 200
General expenses prepaid – 900
General expenses owing 800 –

Transactions during the year ended 30 April 2011 were as follows:

$
Cash received from credit customers 103 160
Cash paid to credit suppliers 88 400
Cash sales to staff 10 750
Sales returns from credit customers 9 200
Discounts allowed 9 540
Discounts received 9 000
Bad debts 8 200
Wages 13 650
General expenses 12 300
Required
(a) Prepare a sales ledger control account to find out the amount of credit sales for the year
ended 30 April 2011.
Sales Ledger Control Account
Cash received from Credit Customers 103160 Balance b/d 18200
Sales Returns 9200
Discount Allowed 9540
Balance c/d 17000 Bad debts 8200

Credit sales=Closing balance of trade receivables+Cash received from credit customers+Sales returns+D
iscounts allowed+Bad debts−Opening balance of trade receivables

Credit sales=17000 + 103160 + 9200 + 9540 + 8,200 – 18200 = 128900

Total Credit Sales is 128900

 (b) There were no further losses of goods during the year. Starting with the opening
inventory, calculate the value of the goods destroyed by the fire on 8 March 2011.

Step 1: Determine Opening Inventory

Given:

Opening Inventory = $33000

Step 2: Calculate Purchases

Given:

Cash Paid to Credit Suppliers = $88400

Closing Trade Payables = $14800

Opening Trade Payables = $16600

Purchases= Cash Paid to Credit Suppliers + Closing Trade Payables −

Opening Trade Payables Purchases= 88400 + 14800 − 16600 = 86600

Step 3: Determine Closing Inventory

Given:

Closing Inventory = $20600

Step 4: Calculate Cost of Goods Available for Sale

Cost of Goods Available for Sale = Opening Inventory + Purchases

Cost of Goods Available for Sale = 33000 + 86600 = 119600

Step 5: Adjust for Sales and Sales Returns

Given:

Credit Sales = $128900 (calculated previously)

Cash Sales to Staff = $10750

Sales Returns from Credit Customers = $9200

Step 6: Calculate Total Sales

Total Sales=Credit Sales + Cash Sales to Staff

Total Sales= 128900 + 10750 = 139650

Step 7: Calculate Adjusted Cost of Goods Sold (COGS)

Using the gross profit margin:

Gross Profit Margin= 33.33%

Gross Profit=0.3333 × 139650 = 46550.14

COGS=Total Sales−Gross Profit

COGS= 139650 − 46550.14 = 93100

Step 8: Adjust for Clearance Sale and Staff Sales

Given:

Clearance Sale = $29700 (at cost)

Staff Sales Cost = $8600 (calculated previously)

Adjusted COGS= COGS − Clearance Sale Cost − Staff Sales Cost Adjusted

COGS = 93100 − 29700 − 8600 = 54800

Step 9: Calculate Goods Destroyed by Fire

Goods Destroyed by Fire= Cost of Goods Available for Sale − Adjusted COGS −
Closing Inventory

Goods Destroyed by Fire = 119600 − 54800 − 20600 = 44200

Final Result:

The value of the goods destroyed by the fire on 8 March 2011 is $44200.
 (c) Prepare the income statement (trading account only) for the year ended 30 April 2011.

Income statement (trading account only)

SALES
Credit Sales 128900
Cash Sales to Staff 10750
Total Sales 139650
Less
Sales Returned (9200)

Net Sales 130450

Less
Cost of Goods Sold
Opening Inventory 33000
Add
Purchases 86600
Goods available for Sale 119600
Closing Inventory (20600)
Adjusted COGS 54800
COGS 93100
GROSS PROFIT 37350
NOTES
Net Sales is calculated by subtracting sales returns from the total sales.
COGS is calculated based on the gross profit margin of 33.33%.
Gross Profit is the difference between net sales and COGS.
 Q#3
The books of Mary Rose gave the following information for the month ended 31 May
2003. All sales and purchases were on credit.

$000
Sales ledger balance at 1 May 2003 5 627
Purchases ledger balance at 1 May 2003 4 388
Sales for the year 100 384
Purchases for the year 64 987
Sales returns 1 997
Purchases returns 864
Payments received from debtors (all banked) 92 760
Payments made to creditors 63 520
Debtor’s dishonored cheque 109
Discount allowed 4 082
Discount received 3 241
Bad debts written off 1 884
Debit balances transferred to purchases ledger control account 208
The total of Mary Rose’s sales ledger balances is £9387, which differs from the
closing balance in the sales ledger control account.

REQUIRED

(a) Extract the relevant information from above and prepare the sales
ledger control account for the month ended 31 May 2003.

Sales Ledger Control Account

Balance b/d 5627 Bad Debt written off 1884

Sales 100384 Debit Balance Transfered 208
Dishonored Cheque 109 Sales Returned 1997
Payment Received 92760
Balance c/d 5189 Discount Allowed 4082

106120 100931

Since the Balance Doesn’t Match with the Closing Account Given information
there is Deficit of 4198
Q#4
Q#2 Kya is a wholesaler. She prepares control accounts at the end of each month.
The following information relates to the month ended 30 April 2011.
Sales ledger control account balance 1 April 2011 64350

Cheques received from debtors 136800

Discount allowed 5250

Bad debts written off 7900

Cash sales 10750

Credit sales 153400

Returns inwards 8100

(a) State two ways in which control accounts can be used by Kya in her business.

(1) Monitoring Receivables and Payables: They allow her to keep track of total amounts
owed to her (debtors) and by her (creditors), ensuring efficient management of cash flow and
credit limits.

(2) Detecting Errors and Fraud: They serve as a tool to identify discrepancies, errors, or
potential fraud in accounts, ensuring accurate financial reporting and safeguarding against
financial mismanagement.

(b) Prepare the sales ledger control account for the month ended 30 April 2011. Balance the
account and bring down the balance on 1 May 2011.

Sales Ledger Control Account

Balance b/d 64350 Bank 136800

Credit Sale 153400 Sales Discount 5250

Sales Return 8100

Bad Debt (W/O) 7900

Balance c/d 59700

217750 217750
Q#5
Q#3Andrea prepares a sales ledger control account. At 30 September 2011 the following
information is available:

$ Trade receivables at 1 October 2010 25000

Credit sales for year 80000

Receipts from credit customers for year 75000

Trade receivables at 30 September 2011 30000

REQUIRED

(a) Prepare the sales ledger control account for the year ended 30 September 2011.

Sales Ledger Control Account

Balance b/d 25000 Receipts from customers 75000
Credit Sales 80000 Balance c/d 30000
105000 105000

(b) State two reasons why Andrea prepares a sales ledger control account.

1. Monitoring and Managing Accounts Receivable: The sales ledger control

account helps Andrea monitor the total amount owed to her business by
customers (debtors). By reconciling the individual customer accounts with the
control account, Andrea can ensure that all sales, receipts, returns, discounts,
and bad debts are accurately recorded. This helps in managing the accounts
receivable effectively and ensures that outstanding balances are collected on
time.
2. Detecting Errors and Fraud: Another key reason Andrea prepares a sales
ledger control account is to detect errors and potential fraud. Discrepancies
between the control account and individual customer accounts can indicate
posting errors, omissions, or even fraudulent activities such as unauthorized
write-offs or fictitious sales. By regularly reconciling and scrutinizing the control
account, Andrea can identify and rectify such issues promptly, maintaining the
accuracy and integrity of financial records.
Q#6
Ann buys and sells on credit. She supplied the following information for the month ended 31 May
2013.

2013 May 1
Trade receivables 5 687
Credit sales 72 641
Receipts from credit customers 64 500
Credit notes issued to customers 8 242
Cash discounts allowed 1 894
Bad debts 800
Contra entry 300
The sales journal had been under-cast by $86.
A cheque received and banked on 8 May from John Lee for $2300 had been returned
by the bank because of insufficient funds.
REQUIRED
(a) Prepare the sales ledger control account for the month ended 31 May 2013. Balance
the account at that date and bring the balance down on 1 June 2013.

Sales Ledger Control Account

1-may balance b/d 5687 Receipts from credit customers 64 500
Credit Sales 72727 Cash discounts allowed 1 894
Dishonored cheque 2300 Bad debts 800
contra entry 300
Credit note issued 8242

Balance c/d 4978

80714 80714
Jun 1 Balance b/d 4978

(b) State three benefits of using control accounts.

• Check on arithmetical accuracy of double entry
• Provides a basis for preparing financial statements
• Find total trade receivables and/or find total trade payables
• Prevents fraud/theft
• Assess staff efficiency
• Save time in producing trial balance and/or final accounts
• Find missing figures in single entry
Q#7

On 1 April 2014, Yee’s sales ledger control account showed the following balances:
$20450 debit and $600 credit. During April the following transactions were recorded:
Credit sales 50500

Cash sales 10000

Returns from credit customers 700

Receipts from credit customers 48600

Refunds to credit customers 750

Discount allowed 1200

Bad debt written off 800

On 1 May 2014, Yee’s sales ledger control account showed a credit balance of $180. The debit balance is
to be determined.

REQUIRED
(a) Prepare the sales ledger control account for the month of April 2014. Balance the account
and bring down the balances.

Sales Ledger Control Account For the Month of April

April 1 April 1
Balance b/d 20450 Balance b/d 600
Credit Sales 50500 Sales Return 700
Refund 750 Receipts 48600
Discount Allowed 1200
Bad Debts(W/O) 800
Balance c/d 180 Balance c/d 19980
71880 71880

May 1 Balance b/d 19980 Balance b/d 180

Q#8

The following information is available from the books of Yana for August 2015.
Trade receivables at 1 August 2015 27520
Credit sales 32400
Cash sales 19970
Sales returns from credit customers 1700
Cheques received from credit customers 40150
Discount allowed 780
Bad debts written off 2900
Interest charged on overdue accounts 600
REQUIRED
(a) Prepare the sales ledger control account for August. Balance the account and bring
down the balance on 1 September 2015.

Sales Ledger Control Account For the Month of August

August 1 August 1
Balance bd 27520 Sales Return 1700
Credit Sales 32400 Cheque Received 40150
Interest Charged 600 Discount Allowed 780
Bad Debts (W/O) 2900
Balance c/d 14990
60520 60520

September 1
Balance b/d 14990
Q#9
Valda prepares a monthly control account for her sales ledger. The following information relates to the
month of August 2016.

Debit Credit

Sales ledger control account balances 1 August 2016 18410 720

Sales ledger control account balances 1 September 2016 ? 580

Cheques received 40500

Dishonored cheque (included in cheques received) 800
Cash sales 8950
Discount allowed 970
Bad debt written off 2750
Credit sales 39600
Returns inwards 3900
REQUIRED
(a) Prepare the sales ledger control account for the month of August 2016. Balance
the account and bring down the balances on 1 September.

Sales Ledger Control Account for the Month of August

August 1 August 1
Balance b/d 18410 Balance b/d 720
Credit Sales 39600 Discount Allowed 970
Dishonored Cheque 800 Bad Debts (W/O) 2750
Sales Returned 3900
Cheque Received 40500
Balance c/d 580 Balance c/d 10550

59390 59390
September 1
Balance b/d 10550 Balance b/d 580

(b) State two reasons for preparing control accounts

• Proof of arithmetical accuracy
• Assist in locating errors
• Provide total trade receivables and trade payables
• Assist in preparing financial statements quickly
• Audit staff efficiency Reduce fraud
Bad Debts
Course: Financial Accounting
Instructor: Sir Shafa Attaullah
Submitted by: Saddam Hussain
Semester: BBA 2 Years Bridging
ID: BUS-24S-224
Depreciation
Course: Financial Accounting
Instructor: Sir Shafa Attaullah
Submitted by: Saddam Hussain
Semester: BBA 2 Years Bridging
ID: BUS-24S-224