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The Creditors Ledger Control Account of B - Leaving Cert Accounting - Question 4 - 2014
Question 4
The Creditors Ledger Control Account of B. Young showed the following balances: €63,552 cr and €490 or on 31/12/2013. These figures did not agree with the Schedule (... show full transcript
Worked Solution & Example Answer:The Creditors Ledger Control Account of B - Leaving Cert Accounting - Question 4 - 2014
Step 1
Prepare the Adjusted Creditors Ledger Control Account.
Answer
The Adjusted Creditors Control Account can be prepared by making the necessary adjustments for each of the transactions:
Adjusted Creditors Control Account
| | € |
|---------------------------|---------|
| Balance b/d | 490 |
| Cash Purchases | 890 |
| Discount Disallowed (ii) | 330 |
| Interest (iii) | 50 |
| Invoice Adjustment (iv) | 680 |
| Restocking Charge (v) | 20 |
| Credit Note (vi) | 313 |
| Balance c/d | |
| | 64,622 |
| Balance b/d | 490 |
| | |
| Balance c/d | 63,819 |
The adjusted balances need to balance at €64,622 as the total debits equal the total credits.
Step 2
Prepare the Adjusted Schedule of Creditors showing the original balance.
Answer
To prepare the Adjusted Schedule of Creditors, we need to account for the balances as per the creditor's list. Here’s the breakdown:
Schedule of Creditors Accounts Balances
| | € |
|---------------------------|---------|
| Balance as per list of | |
| Creditors | 61,892 |
| Add | |
| Cash Purchases | 890 |
| Discount Disallowed (ii) | 330 |
| Interest (iii) | 50 |
| Invoice (iv) | 860 |
| Deduct | |
| Credit Note Adjustment (v) | 360 |
| Credit Note (vi) | 244 |
| | |
| Net Balance as per adjusted | 63,239 |
| Control Account | |
This table shows how adjustments were made to arrive at the final balances.
Step 3
Explain
Answer
A contra item arises when an offset of a debtor against a creditor is involved, where the debtor and creditor are the same person or business. This situation often occurs when a business owes money to a supplier and also has a receivable from that supplier.
(i) How an Opening Balance of €490 might arise.
An Opening Balance of €490 could arise as a result of:
- A full payment of a debt followed by a credit note (returns or reduction) or full payment of a debt.
- Overpayment of a debt could similarly account for this opening balance if excess funds were paid previously.