ANSWERS TO PHACIiCI QUESTIONS: SECTION 2

118 B
113 A
There is no real point in introducing significant controls to protect an asset worth a
maximum of $100 at any given time. Keeping the box locked in a drawer will reduce the risk
34,500 of it being picked up and stolen without imposing undue inefficiencies or delays in
68,900 Balance b/f
78,400 reimbursing valid claims.
Bank 1,200 Purchases (credit)
Discounts received
4,700
Purchase returns 119 A
38,100
Balance clf --­ ..
'112,900 • B describes a purchase order.
112,900 • C describes a supplier statement.
38,100 • D describes a remittance advice.
Balance b/f

120 C
114 B • Quotations are used by a customer to establish the price of goods from various
Receivables ledger control account
suppliers.

250,000 Bank
225,000 • Goods delivery notes are provided by a supplier to detail goods delivered.
2,500
Sales
3,500 Sales retu rns • Debit notes are issued by a customer to cross refer to credit notes issued by a
Bank: cheque returned 3,000 supplier.
Irrecoverable debts
4,000
Contra: trade payables
19,000
• Remittance advice slips are issued by the customer to send to the supplier alongside
Balance clf payment.
• Sales orders are internal documents used by suppliers to record details of orders for
253,500 goods.
253,500 - .. ~

• Purchase orders are sent to suppliers by a customer as a request for supply.

Balance blf
19,000 • Purchase invoices are issued by suppliers as a request for payment.

115 C . f f am error The two CONTROL ACCOUNT RECONCILIATIONS

hat the personal ledger IS ree r .

The control account cannot ensure t t' errors in the personal ledger (e.g. the

may be compensa
totals can agree, but t h ere
mg
b ' . g from both the control aCCoun an

t d 121 B
. d b't d) or an entry may e mlssm

wrong account IS e I e PLeA Payables ledger

the ledger.
$ $
Draft balance 768,420 Draft balance 781,200
116
o ans either that Y owes X $450 or that X owes Y $450 Reverse incorrect debit entry 28,400

A credit entry in the accounts of Y me . . Y's receivables ledger if customer X returned Discounts received - correct entry (15,620)

't t would anse In . .

less than before. A cre d I en ry . . tion would result in debit entries.

goods to Y. All the other transactions m the ques

Revised balance 781,200 781,200

117
o . receivables, sales excluding sales tax and tax on the
• A and D would explain the discrepancy if the balance on the control account was
The sales day book provides totals for II dger by debiting the receivables ledger
f d to the genera e . h th $12,780 greater than the balance on the payables ledger.
These totals are trans erre . d't' the sales account Wit e
sa les
. t receivable ere I mg • C would explain the balance on the payables ledger being $25,560 greater than the
control account with the gross amo~~. the sale~ tax account with the amount of tax
value of sales excluding tax and cre ,tmg balance on the control account.

payable.

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 ANSWEHS TO PHACTICE QUESTIONS: SECTION 2

127 0
122 A SLCA
Payables ledger control accoun~t~...~----~-~--~.-~.~.t.$-..~~
$

318,600 Draft balance per question 37,642

48,000 Balance blf Correction of misposted discount (1,802)

Contras against debit balances

in receivables ledger 1,268,600
1,364,300 Purchases Revised balance receivables ledger balance 35,840
Cash paid to suppliers
2,700
41,200 Refunds received from

purchase returns The balance on the control account exceeds the total of the individual account balances by
suppliers

$1,802. Items A, Band C would all have the effect of making the total of the individual
8,200 account balances higher by $1,802. Item 0, however, by recording a credit item as a debit
Discounts received
128,200 item in the control account, has made the control account debit balance too high by $901 x
Balance clf
1,589,900 2 = $1,802.

128 B
$

123 0 Supplier Balance per ledger account 260

Payables
statement Cash discount disallowed 80

ledger
$ $

3,980
Adjusted ledger account balance 340
230
Per question (270)
Cheque (1) (180)
$

Goods returned (2) (3,200)

Balance per supplier's statement 1,350

Contra (3) Less: Goods returned (270)

230 330 Cash in transit (830)

Revised balance
Revised balance 250
Difference $100 (330 230)

Unreconciled difference =($340 $250) $90

124 A . 10 more than it should have been. The account
The control account has been debited by $ h d effect on the receivables ledger and so
129 0
should be credited. This error woul~ have a no
part of the difference has been explamed. • The purchase day book has been undercast by $500 (Le. the total is $500 lower than it
should be). As a result of this, the purchases account has been debited and the
payables ledger control account (total payables) credited with $500 too little.
125 B
Lord's records • The sales day book has been overcast by $700. As a result, the sales account I}as been
$ credited and the receivables ledger control account (total receivables) has been
14,500
debited with $700 too much.
Per question (150)

Unrecorded discount
• As a result of these errors, the control account balances need to be adjusted, and
profit reduced by ($500 + $700) $1,200, by redUCing sales and increasing purchases.
14,350
Revised balance = supplier statement _ • Neither error affects the entries in the accounts of individual customers and suppliers.
A C and 0 would
150 more than the supplier has stated. Items ,
Lord believes that he owes
$ 130 A
result in the opposite.

• As a result of the error, total payables are understated by $259,440 - $254,940

$4,500. To correct the error, increase the balance in the payables ledger control
126 o . control account. Item C will result in an error in account by crediting the control account.
Ite ms A and B will result in an errorount
In the It
balances. em
0 will not affect either of the totals,
d 'th
• The error has affected the control account only, and not the entries in the individual
the total of individual customer ac.c ., I ts of the two customers affecte , WI supplier account for Figgins in the purchase ledger, so the total of suppliers' balances
. the mdlvldua accoun

although there are errors In th too low by the same amount.

is unaffected.
one account balance too high and the 0 er

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 ANSWFHS TO PItACTICE QUESTIONS: SECTION 2
------------------------

134 C
131 B
Error 1. Total sales and total receivables have been recorded $370 too much. Credit the 1 Unpresented cheques are those issued by a business but not yet banked by the
recipient. They should be deducted from the balance shown on the bank statement
receivables ledger control account by $370. . . in order to reflect the true bank balance.
940 - $490) $450 too little. Credit the
($
Error 2. Total receivables has been recorded
2 A dishonoured cheque is recorded by crediting the cash book. The cheque would
receivables ledger control account by $450 previously have been debited to cash when received. The credit is the reversal of that
As a result of these two errors, total receivables have been under-credited by $820 ($450 + entry.
$370).
3 A bank error should be corrected by amendment to the balance per the bank
ected the accounts of individual customers.
statement.

aff
The errors have not
4 From the bank's perspective an overdraft means that they are owed money by the
customer. Hence it is shown as a debit (an asset to the bank) in the bank statement.
BANK RECONCILIATIONS
135 B
132 0
$ $
Cash book Credit therefore overdrawn Balance per bank statement (overdrawn) (38,640)

(1,350)
Cash book balance per question Add: Lodgement not credited 19,270

(300)
Standing order not yet recorded
(19,370)

(1,650) Less: Unpresented cheques (14,260)

Revised cash book balance

$ Balance per cash book (33,630)

(1,707)
Balance per bank statement (~)
(56)

Un presented cheques
136 B
128
Uncleared lodgements $
(15)

Bank error
Balance per bank statement (200)
Unpresented cheques (1,250)
(1,650)
Revised balance == cash book balance Error 97
d b't
On the bank statement the overdrawn balance is shown as a e I
re
I..
from the bank's
Uncleared lodgements 890

Revised balance = revised cash book balance (463)

perspective they are owed money)

133 B the bank 137 B

balance shows an overdraft, however
Note that the draft ledger account $
statement shows a positive balance: Cash book balance (8,970)

Bank Ledger account

Bank charges (550)

statement
$ $ Revised cash book balance (9,520)
250 (190)
Balance per question
(150)
Unpresented cheques 260 Bank statement balance (~) (11,200)
Misposting of cash receipt 30 Un presented cheques (3,275)
Bank interest Uncleared lodgements 5,380
Bank error (425)
100 100

Revised cash book balance (9,520)

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