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Difficulty: HardControl Account Error Corrections and Ledger Reconciliation

The Purchases Ledger Control Account of Adebayo & Sons showed a credit balance of ₦186,400\text{₦}186,400 on 31 December 2025 prior to ledger reconciliation. An investigation of the accounting records revealed the following errors:

1. A credit purchase of inventory for ₦14,200\text{₦}14,200 was recorded in the Purchases Day Book as ₦12,400\text{₦}12,400.
2. Discounts received amounting to ₦3,500\text{₦}3,500 were correctly posted to individual suppliers' accounts in the Purchases Ledger, but omitted completely from the Control Account.
3. A set-off (contra entry) of ₦6,000\text{₦}6,000 between the Sales Ledger and Purchases Ledger was credited to the Purchases Ledger Control Account in error.
4. A credit purchase of office machinery costing ₦25,000\text{₦}25,000 was incorrectly entered in the Purchases Day Book.

What is the corrected credit balance of the Purchases Ledger Control Account?

  1. ₦147,700\text{₦}147,700Answer
  2. B
    ₦153,700\text{₦}153,700
  3. C
    ₦154,700\text{₦}154,700
  4. D
    ₦172,700\text{₦}172,700

Answer

The corrected credit balance of the Purchases Ledger Control Account is ₦147,700\text{₦}147,700.
Starting with the unadjusted credit balance of ₦186,400\text{₦}186,400, we add ₦1,800\text{₦}1,800 for the understated Purchases Day Book total. Next, we deduct ₦3,500\text{₦}3,500 for omitted discounts received, ₦12,000\text{₦}12,000 to rectify the wrongly credited contra entry on the debit side, and ₦25,000\text{₦}25,000 for the misclassified machinery purchase. This yields an adjusted credit balance of ₦147,700\text{₦}147,700.

Step-by-Step Solution

1
Adjust for the Purchases Day Book under-statement
Add ₦1,800\text{₦}1,800 to the credit balance
The journal total was recorded as ₦12,400\text{₦}12,400 instead of ₦14,200\text{₦}14,200, understating total credit purchases posted to the control account by ₦14,200−₦12,400=₦1,800\text{₦}14,200 - \text{₦}12,400 = \text{₦}1,800.
2
Adjust for omitted discounts received
Debit the control account by ₦3,500\text{₦}3,500 (deduct from credit balance)
Discount received reduces trade payables and belongs on the debit side of the Purchases Ledger Control Account.
3
Correct the misplaced contra entry
Debit the control account by ₦12,000\text{₦}12,000 (2×₦6,0002 \times \text{₦}6,000)
A contra entry reduces liabilities and should be debited. Crediting it erroneously increased the balance by ₦6,000\text{₦}6,000, so a debit of ₦12,000\text{₦}12,000 is needed to eliminate the wrong credit and apply the correct debit.
4
Remove capital expenditure misclassified in the Purchases Day Book
Debit the control account by ₦25,000\text{₦}25,000 (deduct from credit balance)
Purchases of non-current assets (machinery) belong in the General Journal, not the Purchases Day Book. Including it overstated total credit purchases credited to the control account by ₦25,000\text{₦}25,000.
5
Calculate the final adjusted credit balance
₦186,400+₦1,800−₦3,500−₦12,000−₦25,000=₦147,700\text{₦}186,400 + \text{₦}1,800 - \text{₦}3,500 - \text{₦}12,000 - \text{₦}25,000 = \text{₦}147,700
Summing unadjusted balance and net additions/deductions yields the corrected control account balance.

Key Concept

Control Account Error Corrections
Estimated Time:2m 30s
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Topics

Control Account Error Corrections and Ledger Reconciliation

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