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(15.20) D Co’s year-end balance on the receivables control account does not agree to the total of the list of receivables ledger balances of $560,000. The following errors have been identified:
(1) An irrecoverable receivable balance of $30,000 has been correctly written off in the receivables control account but no adjustment has been made in the relevant customers account in the receivables ledger.
(2) Early settlement discounts of $12,500, which were not expected to be taken at the time the invoice was raised, have been omitted from both the receivables control account and the receivables ledger balances.
What was the balance on the receivables control account AFTER the errors were corrected?
A $505,000
B $530,000
C $542,500
D $517,500Answer is D.
I am unable to understand second error. Why it is treated? It should be omitted which is correct.If we bought goods of 25000 with Cash discount of 12500. We expect that customer won’t take so we will Dr A/R 25000 Cr Sales 25000. When customer pays so we will Dr Cash 12500 Dr Sales 12500 Cr A/R 25000.
Account Receivable would be decreased by full amount not only 12500.
What is kit doing then?Your entries are correct, except that when the cash is received they will Dr Cash with $12,500 and Cr Receivables with $12,500. Because the lower payment was because of the discount they also need to Dr Sales and Cr Receivables with the discount of $12,500, but this has been omitted.
Thank you tutor. And tutor, if it would have said to find Reconciled balance so we would have omitted second error as this error will not be reveal if reconcilation done. Or do we have to adjust that also?
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