Week 5 – SS2 Third Term Financial Accounting Notes

WEEK FIVE
TOPIC: CONTROL ACCOUNT
Illustration: The following balance were extracted from the books of Olotun Enterprises on 30^th October, 1993                             N
Purchase 1993                                 7,532
Purchase ledger 1/10/93                            7,948
Sales ledger 1/10/93                            90,454
Sales day book                                77,530
Returns outwards                                 3,960
Returns inwards                                14,180
Cheque received from customers                    56,680
Cheque paid to suppliers                            61,860
Cash overpaid to supplier                          240
Discount allowed                                 3,774
Discount received                                  2,678
Credit notes received                              280
Debit notes issue                                 530
prepare
(a) Sales ledger control account
(b) Purchase ledger control account

 EVALUATION
1.    Draw up the format of Sales Ledger Control Account with ten items.
2.    Draw up the format of Purchases Ledger Control Account with twelve items.

 Sales Ledger Control Account
                 N                             N
1993 Oct. Balance b/f     7,948     1993 Oct. Return inwards          14,180
Sales         77,530 Cheques received from customers 56,680
Debit notes issued     530 Discount allowed              3,774
                 Balance c/d                 11,374
            86,008                         86,008
Purchase Ledger Control Account                          N N
1993 Oct.Returns Outwards 3,960    1993 Oct. Balance b/f      7,532     Cheques paid to supply 61,860    Purchases             90,454    Credit note received      280    Cash over paid          240
    Discount received         2,678        
Balance c/d          29,448
             98,226                     98,226

 EVALUATION QUESTION

1. Explain what is meant by the following (a) Total debtors control account (b) Total creditors control account.
2. State three reasons for preparing Control Accounts.

 READING ASSIGNMENT
Essential Financial Accounting by O.A. Longe Page 188-191

 GENERAL EVALUATION QUESTIONS
1 What is a petty cash book?
2 Explain the imprest system as used in petty cash accounting
3 State four advantages of operating a petty cash system
4 State two reasons for separating capital expenditure from revenue
expenditure
5 Explain two factors which must be considered in determining whether any
particular item is capital or revenue expenditure

 WEEKEND ASSIGNMENT
Use the following information and options provided under it to answer question 1-5

1. Bill receivable
2. Bill payable
3. Dishonour Cheque
4. Credit notes issued
5. Credits notes received

   The above items are recorded under

(a)    General ledger control account
(b)     Purchase Control account
(c)    Proper Journal Control account
(d)    Sales ledger control account

 SECTION B
The following were extracted from Abiona enterprises on 1^st January, 1980
Purchase ledger balance: Debit            N 570
             Credit      N13,252
Sales ledger balance: Debit     N12,520
             Credit          N221
Totals for the year:                N
Purchase Journal                     170,198
Sales Journal                      224,608
Return Inward                      5,002
Return Outward Journal                  3,123
Cheques Paid to suppliers             146,800
Cheques received from customers        189,120
Provision for bad debts                  7,000
Cash received from customers               5,000
Discount allowed                       6,112
Discount received                       3,300
Cash sales                           4,500
Cash paid to suppliers                   550
Bad debt written off                  399
Customers cheque dishonoured         419
Ayo was both debtor and creditor by N725 and N550 respectively. Set this off in the account.
Prepare:- (a) Sale ledger control account
(b) Purchase ledger control account.