Control AccountsControl Accounts are the total accounts used for checking the arithmetical accuracy of each of ledger separately. The two most common control accounts are:

(i)The sales ledger control account (debtors ledger control a/c / total debtors a/c) and (ii)The purchase ledger control account (creditors ledger control a/c/total creditors a/c)

A control account contains the same information as the individual ledger accounts which it controls, but in total. Purposes of control accounts1. To act as a check on the accuracy of the totals of the balances in the sales and purchases

ledgers.2. To provide totals of debtors and creditors quickly when a trial balance is being prepared.3. To identify the ledger(s) in which errors have been made when there is a difference on the trial

balance.4. To act as an internal check on the work of the sales and purchases ledger clerks – to detect

errors and deter fraud, under the charge of a responsible person

The format of sales ledger control account

Balances b/d(large amount) ----------- Balances b/d(small amount) -----------Credit sales ------------ Cash/cheque from debtors ------------Returned cheque discount allowed ------------(unpaid cheque) ---------- Sales returns -----------Interest charged to debtors ---------- Bad debts written off -----------Cash refunds to customers -----------Balances c/d(small amount) ---------- Set off purchase ledger ------------

Balances c/d(large amount) ------------ xxxxxxx xxxxxxx

Balances b/d (large amount) ---------- Balances b/d (small amount) ----------

Sources of information for items appearing in the sales ledger control accounta. Credit sales- sales day book – total.b. Returned cheques (unpaid cheques) – cash book- payments side/ bank statement.c. Interest charged to debtors- Interest received account.d. Cash or cheques from debtors – cash book-receipts side.e. Discount allowed – cash book (debit side) or discount allowed account.f. Sales returns – sales returns day book total.g. Bad debts written off – general journal or bad debts account.h. Set off or contra entries- general journal.

Format of purchase ledger control accountBalances b/d (small amount) --------- Balances b/d (large amount) ---------Cash /cheques paid to creditors --------- Credit purchases ---------Discount received --------- Interest charged by Creditors ---------Purchases returns -------- Balances c/d (small amount) ---------Set off purchase ledger -------- Refunds from suppliers ---------Balances c/d (large amount) --------

xxxxx xxxxxxBalances b/d (small amount) -------- Balances b/d (large amount) --------

Sources of information for items appearing in the purchases ledger control account a Credit purchases – purchases day book totalb. Interest charged by creditors – interest paid account.

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c. Cash/cheque paid to creditors – cash book – payments side.d. Discount received – cash book payment side or discount received accounte. Purchases returns – purchases returns day book total.f. Set off or contra entries – general journal.

Set off / contra entries. Sometimes, the same person may be a debtor as well as a creditor for the business. At the end of the month, the smaller amount in his account from one ledger is transferred to his account in the ledger with large amount. The entry passed for recording this transfer is known as set off or contra entry. Key Points

Control accounts are considered as total accounts. Debtors ledger control account is also known as sales ledger control account or total debtors

account. Creditor’s ledger control account is also known as purchases ledger control account or total

creditors account. Balance in sales ledger control account is the balance of debtors at the year end and

balance in purchases ledger control account is balance of creditors. Cash sales and cash purchases are not recorded in the control accounts. The double entry to record set off from purchase ledger to sales ledger is to debit purchase

ledger control account and credit sales ledger control account. Dishonoured cheque which was received from debtors is shown in the debit side of the sales

ledger control account. Interest on overdue accounts charged from customers and refunds to customers for

overpayments by them are shown on the debit side of sales ledger control account. Interest charged by suppliers and refunds received from suppliers for overpayments to them

are recorded in the credit side of purchases ledger control account. Provision for bad debts is not included in sales ledger control account Small balance in a control account represents advance payments, overpayments etc.

MCQ1. What is the source of information for credit sales for preparing the control accounts?

A. Sales account in the General ledgerB. Sales journal C. General journal D. Sales ledger

2. Which of the following is not considered while preparing the sales ledger control account?A. Opening balance of debtors B. Discount receivedC. Discount allowed D. Returns inwards

3. Which item will appear on the debit side of a debtors ledger control account?

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A. Cash sales B. Cheques receivedC. Return inwards D. Sales on credit

4. Which item will appear on the credit side of a purchase ledger control account?A. Cheques paid B. Discount receivedC. Credit purchases D. purchases returns

5. What is the purpose of preparing the control accounts?A. To calculate the total sales B. To calculate the closing debtors onlyC. To calculate the closing creditors onlyD. To check the arithmetical accuracy of each ledger separately.

6. What is the alternative name of the sales ledger control account?A. Total debtors account B. Total creditors accountC. Purchases account D. sales account.

7. Cash is refunded to customer, who had overpaid his account. In which ledger control account it is recorded?

A. Debit side of sales ledger control account.B. Credit side of sales ledger control account.C. Debit side of purchase ledger control account.D. Credit side of purchase ledger control account.

8. A refund was received from a supplier for excess payment made by us. Where should it be recorded?

A. Debit side of sales ledger control account.B. Credit side of sales ledger control account.C. Debit side of purchase ledger control account.D. Credit side of purchase ledger control account.

9. A purchase ledger control account is prepared from the following list of items:-Total creditors at the start of the month $ 900Credit purchases $ 12000Customers’ debts written off $ 200Cash paid to creditors $ 11800Returns inwards $ 300What is the closing balance?A. $ 600 B. $900 C. $ 1100 D. 1400

10. The table shows details of sales ledger:-Sales ledger opening balance $ 1894Total credit sales $ 10290Cheques received from customers $ 7284Cash received form customers $ 1236Returns inwards $ 296What is the closing balance of debtors?A. $ 3664 B.$ 3072 C. $ 3368 D. $ 2664

Assignment questionsQ 1. The following details are available from the books of Weston for the month of May, 2003.Prepare

Sales ledger control account and Purchases ledger control account. $ Opening debtors 4 000

Opening creditors 3 800Cash received from debtors 8 000Cheques received from debtors 60 000Cheques paid to creditors 55 000Cash paid to creditors 7 000Bad debts written off during the year 750Discount allowed 1 250

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Discount received 1 000 Returns inwards 800Returns outwards 500Transfer from purchases ledger to sales ledger 500Credit sales 80 000 Credit purchases 71 000

Q 2. From the following information prepare the sales ledger control account and purchases ledger control account. $

Opening debtors 12 000Opening creditors 8 000Credit sales 30 000Credit purchases 25 000Returns inwards 500Returns outwards 800Discounts allowed 1 000Discounts received 300Bad debts written off 200Cash paid to creditors 2 500Cheques paid to creditors 20 000Cheques received from debtors 25 000Cash received from debtors 4 500Customers cheques returned unpaid 1 000Set off from sales ledger to purchases ledger 600

Q3. The following details are available from the books of Mathews for the month of June, 2003. Prepare the sales ledger control account and purchases ledger control account for the month of June, 2003.

$Sales ledger control account balance b/d 10 000Purchases ledger control account balance b/d 8 000Purchases for the month 12 000Sales for the month 16 000Returns inwards 1 000Returns outwards 400Payments to creditors 11 000Receipts from debtors 15 000Customers’ cheques returned unpaid 500Bad debts written off 300Discount received 550Discount allowed 750Transfer from purchases ledger to sales ledger 600Credit balance in sales ledger control account 600Debit balance in purchases ledger control account 200

Q4. The following information was obtained from the books of Vale. $ March 1Debtors 9 506

Creditors 2 580March 31 Credit sales 20 345

Credit purchases at list price 7 200Returns outwards at list price 200Sales returns 120Cash and cheques received from debtors 19 580Customers’ cheques dishonored 250

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Cash and cheques paid to suppliers 5 170Discount received 190Discount allowed 210Interest charged to customers on overdue accounts 70Bad debts written off 155Balance in sales ledger set off against balance in the

purchases ledger 350Cash refunds from suppliers for overpayments 60Debit balances in purchases ledger 40Credit balances in sales ledger 64

All purchases and purchases returns were subject to a trade discount of 10% off the list price.Prepare the sales ledger control account and purchases ledger control account.

Q 5. The following information was obtained from the books of K. Kent:- $1 st April, 2002 Trade debtors 28 518

Trade creditors 7 740 Stock in trade 22 500

31 st March, 2003: Credit sales 61 440 Credit purchases at list price 21 600 Purchase returns at list price 600 Sales returns 360 Cash and cheque received from debtors 58 740 Customer’s cheque dishonored 750 Cash and cheque paid to creditors 15 510 Discount received 570 Discount allowed 630 Interest charged to customers on overdue accounts 210 Bad debts written off 465 Balance in sales ledger set off against balance in purchases ledger 1050 Cash refunds from suppliers for overpayments 180 Debit balance in purchases ledger 120 Credit balance in sales ledger 186 Interest charged by our suppliers on overdue accounts 390 Cash refunds to customers for overpayments by them 540

All purchases and purchase returns are subject to a trade discount of 20% off the list price. during the year Cash sales were $ 22 000 and Cash purchases were $ 12 500.

On 31st March, 2003 the stock in trade was valued at $ 12 500.Required to:- a. Prepare the sales ledger control account and purchases ledger control account.b. Calculate the gross profit of the business for the year ended 31st March,2003.

Q 6. The following information is relating to the business of Anson for the month ended 31st March 2003:-Credit sales and return inwards are subject to 10% trade discount on list price.

1st March 2003 Debtors 4,000Creditors 2,000

31 March Credit sales at list price 2,00,00Cash sales 5,000Returns inwards at list price 1,500Credit purchases 12,000Discount allowed 1,500Discount received 1,400

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Customer’s cheque returned by bank with remarks of “insufficient funds”

900

Interest charged on overdue debts 250Return outwards 750Cheques paid to suppliers 7,000Cheques and cash received from credit customers 15,000Credit balance in sales ledger 300Bad debts written off 600

Required:-a. Make sales ledger control accounts of Mr. Ibrahim for the month of March 2003.b. Calculate total Turn over on 31st March 2003

Q 7. The following information was obtained from the books of K. Vasanthi.

$1st April 2003 Trade debtors 19,012

Trade creditors 5,160Stock in trade 15,000

31st March 2004 Credit sales 40,690Credit purchase at list price* 14,400Purchase return at list price* 400Sales return 240Cash and cheque received from debtors 39,160Customers cheque dishonored 500Cash and cheque paid to suppliers 10,340Discount received 380Discount allowed 420Interest charged to customers on Overdue accounts 140Bad debts written off 310Balance in the sales ledger set off against balance in the purchase ledger 700Cash refunds from suppliers for over payments 120Debit balance in purchase ledger 80Credit balance in sales ledger 124Overdue interest charged by our suppliers 260Cash refunds for over payments made by customers 360

*All purchases and purchase returns were subject to a trade discount of 20%off the list price. During the year cash sales were $ 22 000 and cash purchase were $ 12,500.*On 31st March 2004 the stock in trade was valued at $ 12,500.Required:-a. Total Debtors Account for the year ended 31st March 2004b. Total Creditors Account for the year ended 31st March 2004.c. Calculate the Gross profit of the business for the year ended 31st march 2004.

Q 8. The following details are available from the books of a business for the year ended 31st December 2002:- $On 1-1-2000 The balance in the provision for bad debts account 400On 31-12-2000 Total debtors 12 000

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On 1-1-2002 Purchase ledger control account balance 12 700On 1-1-2002 Sales ledger control account balance 14 200On 31-12-2002:

Cheque issued to suppliers 19,200 Cheque received from customers 50,400 Discount allowed 400 Discount received 600 Returns inwards 1 000 Return outwards 900 Bad debts written off 1 200 Dishonored cheque returned to us 1 200 Credit sales 52 000 Credit purchases 28 000 Set off from purchase ledger to the sales ledger 2 000 5% of year end debtors should be created as provision for bad debts Required to prepare:- a. Purchase ledger control account for the year ended 31st December 2002

b.Prepare the sales ledger control account for the year ended 31st Dec 2002.c.The provision for bad debts a/ct and the balance sheet extracts for the 3 years ended 31st Dec 2000,2001 and 2002.

Q 9. Ander Paul, a sole trader, provided the following information from his accounts for the year ended 31st Dec 2013.

$Credit sales for 2013 75 500Credit purchases for 2013 68 900Credit sales return for 2013 700

Total debtors at 1 Jan 13 8 500Total creditors at 1 Jan 13 4 800Prov. for bad debts as at 1 Jan 12 600

Discount Cash Bank Discount Cash BankSales

Debtors 4 000

9 000 1 000

60 000

Debtors(dishonored Cheque)Purchase Creditors 1 800

1 5005 000

600

40 000

The cash book extract figures are totals for the year.The following points are also relevant.1. $ 600 of trade debtors were written off as bad debts on 7th Oct 20032. A revised provision for bad debts is to be 5%of the trade debtor’s balance as at 31st Dec 2013.3. Balance in the sales ledger set off against balance in the purchase ledger $ 300.

Required to prepare the Sales ledger control account and the provision for bad debt account for the year ended 31st Dec 2003.

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