QUESTION ONE
The following information relate to Amua Ltd., a dealer in household goods, for the year ended 30 April 2011 :
1. Balances as at 1 May 2010
Sh.
Sales ledger 24,000 (Cr)
Purchases ledger 156,000 (Cr)
Purchases ledger 8,000 (Dr)
Sales ledger 198,000 (Dr)
2. Total sales for the year include cash sales of Sh.2,100,000 and credit sales of Sh.5,400,000.
3. Total purchases for the year were Sh.4,340,000 out of which credit purchases were Sh.2,998,000
4. During the year, the company received a total of Sh.6,540,000 from both cash and credit customers and made
total payments of Sh.3,860,000 for both cash and credit purchases.
5. Discounts allowed to all credit customers amounted to Sh.145,600 while discounts received from credit suppliers
amounted to Sh.115,800.
6. A balance in the purchases ledger of Sh.140,000 was set-off against the sales ledger.
7. Bad debts written off amounted to Sh.350,000.
8. Credit notes issued to customers amounted to Sh.487,000 and those issued by suppliers of Amua Ltd. amounted to
Sh. 360,000.
9. The balances as at 30th April 2011 were:
Dr Cr
Sh. Sh.
Sales ledger balance To be determined 60,000
Purchases ledger balance 75,000 To be determined
Required:
(i) Sales ledger control account for the year ended 30 April 2011 (4 marks)
(ii) Purchases ledger control account for the year ended 30 April 2011. (4marks)
QUESTION TWO
Greenmark Ltd. ascertains the accuracy of its receivables and payables ledgers by preparing monthly control accounts. As
at 1 September 2008, the following balances existed in the company’s accounting records, and the balances in the control
accounts agreed:
Dr (Sh.’000’) Cr (Sh.’000’)
Receivables ledger control account 188, 360 2,140
Payables ledger control account 120 89,410
The following are the transactions which took place during the month of September 2008, as extracted from the
company’s records:
Sh.’000’
Credit sales 101,260
Credit purchases 68,420
Sales returns 9,160
Cash received from customers 91,270
Purchases returns 4,280
Cash paid to suppliers 71,840
Cash discounts allowed 1,430
Cash discounts received 880
Bad debts written off 460
Refunds to customers 300
Contra settlements 480
As at 30 September 2008, the balances in the receivables and payables ledgers were as follows:
Dr (Sh.’000’) Cr (Sh.’000’)
Receivables ledger balance To be ascertained 2,680
Payables ledger balance 90 To be ascertained
An initial attempt to balance the two ledgers showed that neither of them agreed with their control accounts. The
differences were found to be due to the following:
1. A credit balance of Sh.680,000 had been omitted when listing the receivables ledger balances.
2. A contra settlement of Sh.500,000 had not been included in the totals of transactions prepared for the control
accounts.
3. A new employee had mistakenly entered five sales invoices into the purchases day book as if they had been
purchase invoices and entered the amounts in payables ledger account. The total of these invoices was. Sh.
1,360,000.
4. A Cash refund of Sh.20,000 to a customer was made out of petty cash. This refund had not been included in the
summary of transactions given above. The amount was entered in the receivables ledger as if it had been a cash
receipt from the customer. This entry resulted in a Sh.40,000 credit balance on the account, which was still
outstanding as at 30 September 2008.
When these errors were corrected, both control accounts agreed with the ledgers.
Required:
(a) The receivables ledger control account for the month of September 2008. (10 marks)
(b) The payables ledger control account for the month of September 2008. (10 marks)
QUESTION THREE
ABC Enterprises is a wholesale business which sells agricultural implements on credit terms. The following balances
were extracted from its ledgers as at 30 September 2002.
Sh.
Sales 7,238,690
Creditors – Balance as at 1 October 2001 497,810
Debtors – Balance as at 1 October 2001 846,110
Purchases of agricultural implements 3,429,160
Discounts allowed 82,140
Discounts received 69,780
Cash received from debtors 6,992,670
Cash paid to creditors 3,218,530
Returns inwards 369,250
Carriage outwards 52,640
Selling and distribution expenses 127,480
Provision for doubtful debts as at 1 October 2001 48,130
Additional information:
1. A cheque for Sh.12,460 from Gatemo, a customer was returned by the bank marked “effects not cleared”.
2. Bad debts amounting to Sh.68,540 are to be written off, and the provision for doubtful debts is to be raised to 10%
of the debtor balances as at 30 September 2002.
3. As at 30 September 2002, a cheque had been received for Sh.5,000 from B. Gicho. The customer had owed ABC
Enterprise Sh.50,000 and the debt had been written off as a bad debt in the year ended 30 September 2000. No
entry in respect of this cheque of sh.5,000 has been made in the books.
Required:
(i) Debtors ledger control account (8 marks)
(ii) Bad and doubtful debts account (4 marks)
QUESTION FOUR
The following information was extracted from the records of Africa Breweries Limited for the six months ended 30 June
2000:
Opening balances 1 January 2000 Sh.
Cr balances in purchases ledger 120,000
Dr balances in purchases ledger 4,800
Cr balance in sales ledger 7,100
Dr balances in sales ledger 163,100
During the six months the following transactions took place:
Sales 140,000
Purchases 88,000
Returns inwards from debtors 5,500
Returns outwards to creditors 7,300
Payments to creditors 76,700
Receipts from debtors 91,300
Discount allowed 4,000
Discounts received 2,200
Bad debts written off 3,800
Increase in provision for bad debts 600
Debtor’s cheques dishonoured 7,500
Interest charged on over-due accounts 500
Sales ledger debits transferred to purchases ledger 9,600
Notes:
1. 10% of sales and discount allowed elate to cash transactions.
2. Purchases are inclusive of cash purchases of Sh.22,000.
Required:
Sales ledger and purchases ledger control accounts for the six months ended 30 June 2000. (10 marks)
QUESTION FIVE
Demka Ltd., a Juice distributor has several customers and suppliers. The following information was
extracted from the books of the company for the month ended 30 June 2009:
Sh.
Credit purchases 14,750,000
Allowance for doubtful debts as at 30 June 2009 3,200,000
Credit sales 19,000,000
Claims by Demka Ltd. for price reductions
on defective goods as agreed with suppliers 539,000
Returns inwards 600,000
Discounts received 378,000
Returns outward 450,500
Interest charged to credit customers 1,002,500
Discounts allowed 504,500
Receipts from credit customers 16,532,000
Payments to credit suppliers 15,302,500
Bad debts written off 403,500
Customers cheques dishonoured 4,825,500
Payable ledger credits transferred to receivable ledger 1,073,000
Receivable balance as at 1 June 2009 l0,500,000
Payable balance as at 1 June 2009 4,000,000
Additional information:
1. As at 30 June 2009, customers’ account with credit balance totalled to Sh.2,250,000 while suppliers’
account with debit balances totalled to Sh. 1,067,000.
2. An amount of Sh.143,000 of the receivables was written off in April 2009. However, the
amount was later received in the month of June 2009 and credited to the suspense account.
3. An invoice of Sh.300,000 had not been posted to the receivables control account as at 30 June
2009. The invoice had been correctly posted in the receivables ledger.
Required:
(i) Receivables control account. (6 marks)
(ii) Payables control account. (6 marks)
QUESTION SIX
The balances extracted by PR Company limited from its receivables and payables ledger control accounts as at
31 August 2007 were as follows:
Debit Credit
Sh’000’ Sh’000’
Receivables ledger control account 188,360 2,140
Payables ledger control account 120 89,410
These amounts agreed with the receivable and payables ledger balances.
The following transactions took place during the year ended 31 August 2008:
Sh.’000’
Credit sales 101,260
Credit purchases 68,420
Sales returns 9,160
Purchases returns 4,280
Cash received from credit customers 91,270
Cash paid to trade creditors 71,840
Cash discounts allowed 1,430
Cash discounts received 880
Bad debts written off 460
Refunds to credit customers 300
Contra settlements 480
The receivables and payables ledger balances as at 31 August 2008 were as follows:
Debit Credit
Sh’000’ Sh’000’
Receivables ledger balances ? 2,680
Payables ledger control account 90 ?
The receivables and payable ledger balances as at 31 August 2008 did not agree with the control account
balances. Upon investigation, the following errors were discovered:
1. A credit balance of Sh.680,000 had been omitted when listing the receivables ledger balances.
2. A contra settlement of Sh.500,000 had not been included in the totals of transactions prepared for the
control accounts.
3. A new employee had entered the value of five copy sales invoices amounting to Sh.1,360,000 into the
purchases day book by mistake. The amount was also recorded in the payables ledger account instead of the
correct account.
4. A cash refund to a credit customer of Sh.20,000 was paid from petty cash. The cash refund was not included
in the transactions summary for the year ended 31 August 2008. The amount was however mistakenly
recorded in the receivables ledger as a cash receipt from a credit customer.
Required:
(i) Receivables ledger control account (9 marks)
(ii) Payables ledger control account (8 marks)