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Hello. May you answer my question please?
In the answer (b) $2,420 is deducting from the payables ledger control account (as debit). Why is it deducting? It is just written that $2,420 has been offset wrongly in the payables ledger (not nominal ledger) as $3,650. There is no information that it has not been offset in the control account. Thanks
At 1 April 20X9, the payables ledger control account showed a balance of $142,320.
At the end of April the following totals are extracted from the subsidiary books for April:
Purchases day book: $183,800
Returns outwards day book: $27,490
Returns inwards day book: 13,240
Payments to payables, after deducting $1,430 cash discount: 196,360It is also discovered that:
(a) the purchase day book figure is net of sales tax at 17.5%; the other figures all include sales tax.
(b) a customer’s balance of $2,420 has been offset against his balance of $3,650 in the payables ledger.
(c) a supplier’s account in the payables ledger, with a debit balance of $800, has been included on the list of payables as a credit balance.
What is the corrected balance on the payables ledger control account?
The 2,420 is not a mistake – it is a contra entry. A customer was owing us money, and we were owing money to the same person as a payable.
When there is a contra entry it needs doing in both the payables ledger and the payables ledger control account.
Have you watched my free lectures on Books of Prime Entry? The lectures are a complete free course and cover everything needed to be able to pass Paper F3 well.
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