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Difficulty: MediumContra Entries and Set-offs

Adeola Traders operates a dual ledger system. On 1st July 2025, the debit balance of the Sales Ledger Control Account was N145,000\text{N}145,000. During July, credit sales amounted to N82,000\text{N}82,000, cash collected from debtors was N94,000\text{N}94,000, discount allowed was N4,000\text{N}4,000, and bad debts written off totaled N3,000\text{N}3,000. A contra entry of N16,500\text{N}16,500 was set off between the sales ledger and purchases ledger. What is the closing debit balance of the Sales Ledger Control Account at the end of July 2025?

Answer: 109500 Naira

Answer

109,500 Naira
Contra entries represent mutual set-offs between customer and supplier accounts. In the Sales Ledger Control Account, a contra entry is credited because it reduces the overall indebtedness of customers. Therefore, subtracting cash received, discounts allowed, bad debts, and the contra entry from total debits (opening balance plus credit sales) yields a closing debit balance of 109,500 Naira.

Step-by-Step Solution

1
Sum all debit entries in the Sales Ledger Control Account
Total Debits = N145,000+N82,000=N227,000\text{N}145,000 + \text{N}82,000 = \text{N}227,000
Opening debit balance and credit sales increase the total receivables balance.
2
Sum all credit entries, including the contra set-off
Total Credits = N94,000+N4,000+N3,000+N16,500=N117,500\text{N}94,000 + \text{N}4,000 + \text{N}3,000 + \text{N}16,500 = \text{N}117,500
Cash receipts, discounts allowed, bad debts written off, and contra entries reduce the debt owed by debtors.
3
Calculate the closing debit balance
Closing Balance = N227,000−N117,500=N109,500\text{N}227,000 - \text{N}117,500 = \text{N}109,500
Subtracting total credits from total debits yields the net remaining debit balance.

Key Concept

Treatment of Contra Entries in Sales Ledger Control Account
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Topics

Contra Entries and Set-offs

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