- 20 Marks
FA – April 2022 – L1 – Q3 – Control accounts and account reconciliations | Correction of errors
Preparation of a revised Sales Ledger Control Account and a revised schedule of receivables, including the correction of errors.
Question
Gyidi Ltd sells goods on credit to most of its customers. In order to control its system of debt collection, the company maintains a sales ledger control account. The following information is available for the year ended 31 December 2020.
| Account | Amount (GHȼ) |
|---|---|
| Sales Ledger Control Account balance b/d 1 January 2020 | 88,200 (Debit) |
| Sales | 310,400 |
| Sales returns | 20,600 |
| Discounts allowed | 15,000 |
| Irrecoverable debts | 3,500 |
| Cheques received from customers | 292,040 |
| Dishonored cheques | 650 |
| Contra purchases ledger | 1,050 |
The schedule of receivables as at 31 December 2020 has also been provided as follows:
| Customer | Amount (GHȼ) |
|---|---|
| Kwaku Ansah | 14,200 |
| Adam Musah | 15,000 |
| Akua Afari | 22,800 |
| Naa Shikaa | 1,400 |
| Kofi Amosah | 8,600 |
| Total | 62,000 |
The sales Ledger Control Account balance did not agree with the total from the schedule of receivables. Subsequent investigations revealed the following errors: i) Cash received of GHȼ600 had been credited to Kwaku Ansah’s account as GHȼ60. ii) The discount allowed column in the cash book had been overstated by GHȼ960. iii) A sales return of GHȼ3,200 from Adam Musah was correctly recorded in Adam Musah’s account but had been omitted from the total in the Sales Returns Journal. iv) A credit sale of GHȼ4,000 to Kofi Amosah was correctly recorded in the Sales Journal but no entry had been made in Kofi Amosah’s account. v) A cheque received from Naa Shikaa for GHȼ2,430 correctly processed through the books had subsequently been dishonored. No entries have yet been made to record this dishonored cheque. vi) A credit sale of GHȼ5,200 had been made to Kwaku Ansah but no entries have yet been made to record this transaction. vii) Cash received of GHȼ300 had been debited to Kofi Amosah’s account. viii) No contra entry had been made in Akua Afari’s account in the Sales Ledger in respect of purchases by Gyidi Ltd from Akua Afari for goods with a list price of GHȼ750 less an 8% trade discount. This item has been correctly recorded in the Sales Ledger Control Account.
Required:
a) Prepare a revised Sales Ledger Control Account for the year ended 31 December 2020.
(9 marks)
b) Prepare a revised schedule of receivables as at 31 December 2020.
(7 marks)
c) Explain TWO (2) ways in which control accounts can be useful to businesses.
(4 marks)
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