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Hi Sir,
I have a question regarding correction of errors:
The total of the list of balances in Valley’s payables ledger was $438,900 at 30 June 20X6. This balance did not agree with Valley’s payables ledger control account balance. The following errors were discovered:
1) A contra entry of $980 was recorded in the payalbes ledger control account, but not in the payables ledger.
2) The total of the purchase returns daybook was undercast by $1000.
3) An invoice for $4344 was posted to the supplier’s account as $4434.What amount should Valley report in its SOFP for accounts payable at 30 June 20X6?
I understand that you take away 980 from 438900 (although could you please explain what type of error this is?) and error 3 makes sense as well. Why is error 2 not included as part of the working of the answer, however? Is this not an error of omission?
(The answer is $437,830).
Kind regards,
YazanThe payables ledger is not part of the double entry – it is only a note, in order to know how much is owed to each supplier.
The control account is part of the actual double entry.
The reason that error (2) is not relevant for this question is that the totals from the books of prime entry are only used in the control account. In the payables ledger, each individual return will be entered separately and so the balances in the ledger are not affected if any of the books of prime entry are totalled wrongly.
(You could call error (1) an error of omission, but it doesn’t really have a name because it is not an error in the actual double entry).
You might find it useful to watch the free lectures on ‘Books of Prime Entry’ and on Control Accounts.
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