Control Accounts part 1 – ACCA Financial Accounting (FA) Lectures
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Hi. May be a silly question but can I please ask what is the difference between Purchase/Sales Journal/Day Book and the Payable/Receivable Ledger Control account.
Does Receivable A/c = Receivable Ledger Control A/c = Sales Journal/Day book?
No.
The Receivables Ledger Control Account is indeed another name for the Total Receivables Account in the nominal/general ledger.
However the Day Books are not the same. They are just lists os invoices for sales on credit and for purchases on credit and are not part of the double entry.
You must watch my lectures on Books of Prime Entry where this is all explained in detail.
Hello, thank you for your lectures – they’re great and so helpful!
I recently failed the FA exam by 1% !!!! so I’m going back over the syllabus so I can pass next time.
I still do not understand how to be certain a contra goes on the Dr or Cr side of the control account. I am sure it is very simple but I am confused – any help pls gratefully received, thanks
Hi Befree,
I’m so sorry to hear that you failed by 1%, You must be feeling awful.
I have a small clue to figure out the Contra Entry;
Double Entry For A Contra Entry:
Hi Befree,
I’m so sorry to hear that you failed by 1%, You must be feeling awful.
I have a small clue to figure out the Contra Entry;
Double Entry For A Contra Entry Is Alway’s:
Payable’s Control A/C – Dr
Receivable’s Control A/C – Cr
The idea behind this is that the value of Both Receivable’s & Payable’s must be ‘Reduced’ simultaneously by the ‘Contra’ Amount.
In order to Reduce the Total value of the Trade Receivables the account must be credited. as (Debiting the Account would increase the value)
In order to Reduce the Total value of the Trade Payables the account must be debited. as (Crediting the Account would increase the value)
I’m not sure if it’s too late, But hope this helps 🙂
Please disregard the previous comment
Good Luck!
Sir, in your lecture notes,
“Suppose we sell goods for $500 on credit to Mr X. A week later, Mr X returns half the goods to us (and we accept the return).”
you credit ” Receivables” and debit “Sales”.
Why not Debit “Sales returns”?
By all means debit sales returns. You then subtract sales returns from sales on the SOPL and the end result is the same. If returns happen a lot then they might well have a sales returns account. If it only happens rarely then they probably will not – there is no rule.
Hello Sir,
Is it also correct to Debit payables with a full $1000 to bring the balance to 0 in this account and take the $50 to the Discount Received A/c?
Yes, the end result will be the same.
Discounts received are not other income according to IFRS. They reduce the price of the asset purchased or the expense incurred.
That is true for trade discounts, but is not true in the case of discounts for early payment (as explained in the lecture!).
How do we show cash discount received of 50 in SOPL. Do we show it as Purchases 1,000 less Cash Disc 50 (impact on GP) or show as “Other Income” 50 after GP (impact on Net profit)?
Other income, after the gross profit.
Thank you!!!
You are welcome 🙂
Hello,
Is the first example of discount a trade discount and second cash discount?
Do we record the net balance of trade discount and gross balance of cash discount?
Yes to both. (Although for sales, the treatment of a discount for early payment is different and is covered in a later lecture on IAS15)
Happy New Year Mr. Moffat ?
An awesome lecture as always !
thank you & I wish you well !
sir when we give quantity discount where is the discount allowed accounted for? even though its not affecting the double entry,i think it affects the valuation of budgeted sales hence profit. will it be presented in SOPL as well? thank you.
A quantity discount simply reduces the amount on the invoice. It is the amount on the invoice that is entered as normal in the sales and the receivables account.
If the individual entries have a mistaken, are the control accounts affected ? I feel the answer should be “no” unless the individual entries in the source data – the books of prime entries are wrong. But here the individual accounts have been entered separately as notes to the Ledgers. No double entries. Therefore I believe if there was a mistake in the individual entries in the ledger, the Control accounts would not be affected. Please confirm, Sir
I confirm.
Thankyou, sir.
Wow, This lecture mademe exciting for the next. Thanks for making it as simply as possible sir.
Thank you for your comment 🙂
Sir, sorry for my confusion but I have difficult identifying the difference between receivable journal and receivable ledger. What are the purposes of these two, then why does the receivable journal datas combine and form receivable ledger control a/c, but how about the datas in receive ledger? They only exist for checking the balance between their balance and receivable ledger control a/c balance?
The receivables ledger control account is part of the double entry and records the total owed from customers. In order to find out the total to enter in this account, each individual invoice is listed in the receivables journal and then the total is added.
The reason we also have a receivables ledger is that although the control account shows the total we are owed (and this is all we need for the SOFP), the company also needs to know how much each individual customers owes (so that, for example, we can chase anyone who is late paying).
Thank you so much sir. I totally get it now.?
You are welcome 🙂
5:03 .. Its MrC that owes 100 not MrB
True, and thanks (although I am not going to re-record the whole lecture just for that 🙂 )
Sir,can you help me with this question?
Which of the following statements concerning the receivables ledger control account is incorrect?
D. It ensures that errors cannot occur in relation to transactions between the business and its customers.
The answer is D
Why?
In future you must ask this sort of question in the Ask the Tutor Forum, and not as a comment on a lecture.
It is incorrect because although it will find many errors, there are errors that it would not find. For example, suppose we sent an invoice to a customer for $100, but by mistake listed it in the receivables day book as being $10. The wrong figure would then be entered in the receivables ledger, and also the total in the day book would be wrong and so the wrong figure would also be entered in the receivables ledger control account. As a result, the balance on the control account will still equal to total of the list of balances, even though the figure is wrong.
Sir,may I know what’s new in these updated lectures? I had watched your previous Control A/c lectures
They are better recordings – the syllabus has not changed.