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March 10, 2016 at 3:31 pm
In the receivable account, dishonoured cheques from credit customer is a debit entry?
John Moffat says
March 10, 2016 at 5:04 pm
Yes – that is correct 🙂
February 22, 2016 at 5:05 am
Thank you for lectures. While preparing and fixing errors for receivable/payable control account, am i right if i assume that only double entry ledger accounts affect control account and not the journal books like payable journal or receivable journal?
February 13, 2016 at 11:10 am
In the test question 1, pg 110
why have you not considered allowance for receivables ?
allowance reduced the amount to cash we’re going to receive. So why is that an error?
February 13, 2016 at 1:59 pm
An allowance does not reduce the cash we will receive. The cash is only reduced if a debt becomes irrecoverable (and I say this during the lecture).
I do suggest that you watch the free lectures on irrecoverable and doubtful debts.
January 24, 2016 at 10:02 am
I couldn’t able to find these question in the notes where are the examples?
January 24, 2016 at 12:09 pm
Try looking at example 1 in the chapter on control accounts.
June 8, 2015 at 7:24 pm
Sir! Chapter 16 Test papers QNo:4 reads as follows Opening balance of the payable ledger is $438900. There was a contra entry $980. The total of Purchase return journal was undercast by $1000 and an invoice of $4344 was posted as $4434. What is the amount to be reported as accounts payable.
The answer is said to be $437830 (D). but i disagree with it since there are purchase returns that has not been accounted for. I feel the answer is A ($4368300 That is Credit $438900 and debit $ 980 contra, Debit purchase return $1000 and debit the amount to correct the invoice $90 and the difference $436830. Kindly help.
June 8, 2015 at 8:36 pm
The answer in the lecture notes is correct.
The payables ledger is where each individual balance is recorded. Each item from the purchase returns journal will be entered separately in the individual accounts in the payables ledger.
The total is entered in the nominal/general ledger and so that is wrong and the payables ledger control account balance will be wrong.
However the total does not affect the payables ledger itself at all.
August 21, 2015 at 2:51 pm
So the undercasting of purchase returns is to be corrected only in payables ledger control account?
August 21, 2015 at 3:36 pm
That is correct 🙂
August 21, 2015 at 3:57 pm
Thank you sir 🙂
March 24, 2015 at 7:16 am
Because it is always to cancel a receivable (so credit receivables) against a payable (so debit payables) because we are owed money and we owe money to the same person.
March 24, 2015 at 10:17 pm
Oh! I got that. Thank you so much!
March 23, 2015 at 8:23 pm
Can you please explain how is it that we always credit receivables and debit payables account in case of contra entries?
April 16, 2015 at 8:10 pm
He explained it in the first video @purnima. It’s more towards the end of the video if you want to fast forward.
February 15, 2015 at 7:09 am
Hello sir. Question three is a bit of a hurdle.
February 15, 2015 at 8:42 am
I do think a way out might have been found. By using the T account method used in the Statement of cashflows, we get the missing figure :
Cash paid 302,800 II Balance b/f 60,000
Discounts rec 2,960 II PURCHASES 331,760
Balance c/f 84,000
totals 391,760 391,760
Balance b/f 84,000
I frankly hope not to be wrong about this, given the amount of time I had to waste before thinking about that trick you showed us 🙂 .
Let’s expect Sir John Moffat validates it.
February 15, 2015 at 8:52 am
Your answer is correct (but it is at the back of the Lecture Notes along with all of the answers 🙂 )
February 15, 2015 at 3:05 pm
YES !!!!! Haha got it ! I just looked at my course notes and it does not appear under the heading Chapter 16.in the answers section. Isn’t that strange ?
February 9, 2015 at 4:04 am
Thank u for your great lectures,Mr.Moffat.
And I have a question about test3,trade payables were 84000 and I know its closing balance,how can we be sure we should debit 84000 rather than credit?
Please help me deal with this problem,thank you ^_^
February 9, 2015 at 8:32 am
Payables are a credit balance and so we must end up with a credit balance of 84,000.
We always bring down balances from the opposite side, so to complete the t-account we put 84000 on the debit side and then carry it forward as a credit balance.
It will help you to go back through chapter 3 of the lecture notes, and the lecture that goes with it.
February 9, 2015 at 8:40 am
I will review chapter 3,thanks for your answer 🙂
September 22, 2014 at 1:55 pm
1. pls, sir. while going through control accounts in chapter 16, i got stuck in test question 2 & 4.pls, i need a detailed explanation .
2. is there any difference between receivables ledger control account & sales day book(receivables journal) ; payables ledger control account & purchases day book(payables journal) ?
pls, i’ll appreciate it if you can reply as soon as possible.
September 22, 2014 at 2:02 pm
Paul had not received the cash when the statement was prepared – when he has received the cash he will show Peter as owing 8950 – 4080 = 4870
Paul has disallowed a discount, but Peter has not adjusted for it and he should do. So cancelling the discount will mean that he shows as owing to Paul 4140 + 40 = 4180.
So the discrepancy remaining is 4870 – 4180 = 690.
September 22, 2014 at 2:06 pm
Because the only figure that we have is the total of the list of balances in the payables ledger, we need to correct that total and are only interested in errors in the payables ledger.
The contra entry has not been recorded in the payables ledger, so we need to reduce the total by 980.
The total in the returns journal will only affect the control account and is there not relevant here. (It is the individual figures that are entered in the payables ledger and so they are not affected if the total in the journal is wrong)
The invoice that was wrongly posted does affect the payables ledger. Too much was posted to we need to reduce by the difference.
September 22, 2014 at 2:08 pm
There is an enormous difference between the control accounts and the day books (journals).
The control accounts are the t-accounts recording total receivables and total payables.
The journals are not part of the double entry and are simply lists of sales on credit and purchases on credit.
You should watch the lecture on Books of Prime Entry – all the books are explained with a big example.
June 21, 2014 at 7:58 pm
Could you please explain me why in the Question 4 (Chapter 16) we don’t have to consider the Error 2, where the purchase returns journal was undercast by $1,000, to get the correct answer?
May 29, 2014 at 2:30 am
While perusing through my text I came across Cash pd to clear credit balances ( debited to r’bles control a/c) and Cash received clearing debit balances (credited to pybls control a/c), needed clarification please.
May 29, 2014 at 4:00 am
It is not easy to answer without seeing the example.
I am guessing that maybe some of our receivables had overpaid us and therefore we had come credit balances. If they have paid us too much then we will give them their money back – cr cash; debit receivables. This then clears the credit balances.
The came idea for the debit balances on payables.
April 26, 2014 at 2:36 pm
Please is sales returns the same thing as returns inwards and purchases returns the same things as returns outwards? Please can you help clarify? because I have seen questions in from this topic that the terms were used interchangeably?
April 27, 2014 at 8:30 am
Yes – they are the same thing 🙂
March 24, 2014 at 9:57 am
With respect to the Refund to Customers entry, i do understand your explanation in the lecture, and i just wanted to ask what if for example, the customer purchases an item by cash, and then later on sees the price tag on it and realises that he was overcharged at the store. Given that it was a cash sale, and assuming he has no account, wouldn’t this be a scenario where you would credit cash and debit returns? i.e. no entries into Receivables A/C
In the exam, do we always assume (unless told otherwise), that sales are on account? and as you said, any refunds are due to qualifying reasons (eg, over payment)?
March 24, 2014 at 10:02 am
You are correct. However in the exam you won’t have the situation where the company is overcharging 🙂
March 24, 2014 at 10:05 am
Brilliant thank you!
January 27, 2014 at 2:17 pm
sir i have a question.
when you have some errors given how do you identify which of them affects your receivables or payable s control account. ?
January 27, 2014 at 2:26 pm
Mainly from remembering the books of prime entry.
If a total is wrong then it is an error in the control account (because only the control account uses the totals).
January 27, 2014 at 4:36 pm
in question #4 why part 2 is not included ?
January 27, 2014 at 4:48 pm
Because the figure we are given is the total of the payables ledger balances (not the control account balance).
The payables ledger shows all the individual balances, and the total of any of the books is not relevant in the ledger each separate figure will have been entered in each separate payables account in the ledger. So the total of the ledge balances is not affected by the total of any of the books of prime entry being wrong.
November 28, 2013 at 12:00 pm
Mr John, is there other tricky entries like the Refund one. .i thought we must credit Cash account and Debit Refund. .but why did it go to the Receivables ?
November 28, 2013 at 12:52 pm
A refund a repaying cash for the customer for some reason – for example, he may have owed us 100 but accidentally paid us twice and so we need to repay (refund) the extra 100.
When we received the cash we debit cash and credit receivables.
So if we then repay (refund) some of the cash for any reason, we do the opposite – credit cash and debit receivables.
November 23, 2013 at 4:12 am
Test question 2 (1) cash paid to paul $4080 has not been allowed for by paul
wht does this mean ???????????? wht is the entry for this plz help =(
November 23, 2013 at 6:58 am
It means that Paul has not yet recorded a receipt of 4080. Probably because the money is on its way. When it is received he will debit cash and credit peters account, but for the moment it simply explains part of the difference. (This often happens in practice)
November 24, 2013 at 6:30 am
thanks john =D
August 29, 2013 at 4:16 pm
Need help here regardin f3
A payables ledger control acc showed cr balance of 768420. Payables ledger balances total 781200. Which one of the following possible errors could account in full for the differences?
A) A contra against a receivable ledger dr balance of 6390 has been entered to the cr side of payables ledger control acc
B) The total of discount allowed 28400 was entered to the dr side of the payables ledger control acc instead of the correct figure for discount received of 15620
C) 12780 cash paid to supplier was entered on the cr side of the supplier acc in the payables ledger
D) The total discount received 6390 has been entered on the cr side of the payables ledger control acc
Can someone explain to me each situation how to solve this. WHat are the accounts involved?
I always have problem with this kind of questions and my answer is always more than 1 of those. The correct answer is B
Which of the following errors should be identified by performing a receivebles control acc reconiliation?
A) A sales invoice of 500 has been omitted from the sales daybook
B) A sales return 45 was entered as 54 in the sales return day book
C) Purchases of 72 were entered as sales return daybook and the individual acc
D) The total of the sales daybook was miscast by 200
Sales day book are credit sales but may i know how the accounts are involve in here?
November 24, 2013 at 8:54 am
For question 1:
A is wrong because they should have debited payables ledger control (not credited) – this would mean that the control account should have a lower balance. The difference would then be bigger.
B is correct because the should have debited the control with the correct figure of 15620 instead of 28400. So they should have debited with 12780 less (the difference) which would make the control account balance 12780 bigger – it would then agree with the ledger total.
C is wrong because they should have debited the ledger account with 12780 instead of crediting. This would make the total of the ledger balances smaller by two times 12780 – this is more than the difference we are looking for.
D is wrong because the discount should have been entered on the debit side of the control account. This would make the control account balance smaller, which would have increased the difference.
The entries in the receivables ledger are taken individually from the books of prime entry. The entries in the control account are the totals from the books of prime entry.
A is wrong. If an invoice is missing from the book, then it will not have been entered in the ledger, and it will not be included in the total for the control account
B is wrong. If an amount is listed wrongly in the day book, then the wrong figure will have been entered in the ledger, and the wrong figure will have been included in the total for the control account
C is wrong because the 72 would have been entered in the ledger as though a return, and included in the total of returns for the control.
D is correct, because having the wrong total makes the control wrong, but the ledger will have used the individual figures – not the total.
February 7, 2013 at 1:34 pm
why the word CONTROL in the name control accounts
February 8, 2013 at 8:50 am
Because the balance on the control account should be the same as the total of the balances in the receivables or payables ledger.
The control account controls (or checks) the ledger.
December 19, 2012 at 11:00 am
Mr.Muffat, can you please explain test question number 4?:)
November 12, 2012 at 12:13 pm
@johnmoffat, Thanks for that. So in the case of overpayment, receivables has been credited by too much, and so needs to be pruned to the correct level. That does make sense. Thank you…
November 4, 2012 at 3:38 am
have you any lecture videos on control account Reconciliation
May 12, 2012 at 5:37 pm
Q4 The total of the list of balances in Adele’s payables ledger was $438900 at 30 June 2008. This balance did not agree with Adele’s payables ledger control account balance. The following errors were discovered:
(1) A contra entry of $980 was recorded in the payable ledger control account , but not in the payable ledger
(2) The total of the purchase returns journal was undercast by $1000
(3) An invoice for $4344 was posted to the supplier’s account as $4434
What amount should Adele report in its statement of financial position as accounts payable at 30 June 2008?
Why the answer is D , not A.
D is 438900-980-90=437830. But why (2) didn’t be deducted.
June 18, 2012 at 12:56 pm
@pagermm, the undercast will affect the balance in the receivables account in the nominal ledger. but for the receivables ledger you have accounts for each debtor so the undercast will not affect the list of balances from the receivables ledger. i hope am not late. i was also confused and this is the time it clicked.
June 19, 2012 at 3:26 am
@pankajharish, thank you very much, it is not late. My exam is cbe.
December 1, 2012 at 8:38 pm
@pankajharish, Hello, I’m not sure I agree, for Purchase returns we credit purchase returns and we debit payables, I’m still not convinced why the answer is not A
February 22, 2013 at 10:03 pm
agree with @nzeadall. Purchase returns is what we buy on credit (payables and purchases accounts) and return. How it could affect receivables? Please explain, sombody
March 19, 2013 at 11:05 am
@pankajharish, please explain why you talking about receivables? Purchase return is what we buy and return, so it should be in payables a/c or not?
April 27, 2013 at 3:29 pm
we don’t take into account $1000 because it doesn’t affect your payables account.
when you have an undercast (understated) error, that means one side of transaction was done, but the second is missing
so in our case accountant did in payables account Dr $1000, but forgot to do Cr $1000 in Purchases.
hope this helps.
Credit to Kaymakov, He suggested the answer in Forums.
May 2, 2012 at 12:22 pm
Kindly refer (18.00) onward in your lecture.
I would be thankful if you’d explain the refund entry to me, because what if we have received the the correct amount, and we are only repaying him due to the returns, as you also mentioned that refund could be the reason for returns.
Wouldn’t the correct entry then be returns (Dr) and receivable (Cr) ?
Kindly correct me if i’m wrong sir,
May 31, 2012 at 6:12 pm
@ajlaltariq, @admin please explain this to me too…
What happens if we received the correct amount but we are repaying due to returns.. shouldnt this be a credit to the receivables to reduce ?
May 31, 2012 at 6:13 pm
@msoph, @johnmoffat please advise sir.
August 2, 2012 at 10:13 am
@ajlaltariq, I am sorry for not answering this sooner 🙁
The entry for a refund (whatever the reason for it) is always the same as in the lecture.
If someone returns goods to us, then we credit receivables (because they owe us less) and debit returns.
If there still ends up with a debit balance on their receivables account (because they have made other purchases from us) then we probably will not make a refund – the will just pay us less.
If we do make a refund of cash then we enter it as in the lecture i.e. credit cash and debit receivables.
I hope that makes sense 🙂
November 11, 2012 at 11:20 am
@johnmoffat, thanks for your explanation, but I’m still having a hard time getting my head around this. Your explanation in the video is simple enough. The entries are simply the reverse of when we make a sale, and the balance on the accounts return to the status quo ante.
However I’m still not getting it logically. Receivables is an asset, right? It’s the money we’re owed. Assets are increased in the debit column. How can we gain in assets by paying someone back? How can the money that we’re owed increase?
November 11, 2012 at 11:50 am
@marcusdixon, to correct my first sentence, it’s to return to the status quo ante before making the customer made the payment, rather than the status quo ante before the sale was made on credit. However my logical problem from my second sentence, ie how the refund of cash can somehow boost an asset (ie receivables) remains.
November 11, 2012 at 8:41 pm
@marcusdixon, A refund is simply a repayment, and there can be several reasons why you might decide to repay cash. For instance a customer might have paid an invoice twice by mistake and therefore you repay (refund) the overpayment.
If a customer owes you $100 then you have a debit balance on receivables of $100 (an asset!!).
If the customer pays you the $100 twice by mistake, then you debit cash with $200 and credit receivables with $200. That means you have a credit balance on receivables of $100 (a liability!!!).
So…you refund the $100 overpayment – credit cash and debit receivables. That means the balance on receivables is now zero which is correct – he does not owe you and you do not owe him.
It does not matter why you are making the refund – it could be because of an overpayment, it could be because you have entered a credit note for a return.
A refund is always, for whatever reason, a repayment of cash and therefore the entry is always to credit cash and debit receivables.
(and why should a repayment of cash not boost an asset? Less cash is reducing assets, more receivables is increasing an asset, which is the whole essence of the dual effect / double entry concept.)
April 15, 2012 at 5:53 pm
as i am using a low speed internet connection , it is quite hard for me to buffer the video every time when i need to see it. it will be really helpful if the website it provide us with a download link .
March 10, 2012 at 12:29 pm
tanks alot well understood i was able 2 concord a qestion from dec-2011 past paper but what about control account Reconcilation….
March 10, 2012 at 12:32 pm
March 2, 2012 at 9:24 am
Soft Supplies Co recently purchased from Hard Imports Co 10 printers originally priced at $200 each. A
10% trade discount was negotiated together with a 5% cash discount if payment was made within 14
days. Calculate the following.
(a) The total of the trade discount
(b) The total of the cash discount
(a) $200 ($200 * 10 * 10%)
(b) $90 ($200 * 10 * 90% * 5%)
Somebody please explain where 90% came from.
March 10, 2012 at 3:20 pm
@tomasrast, Because of the trade discount of 10%, the invoice amount will only be 180 for each printer (90% of 200).
The cash discount is based on the invoice amount – 5% of 180 = $9 per printer.
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