Examkin

Question

Difficulty: MediumCalculation of Total Sales and Total Purchases

Kolawole Enterprises operates a business with incomplete financial records. For the year ended 31 December 2025, the following records were extracted from the business books:

- Creditors balance at 1 January 2025: ₦15,000
- Payments made to creditors during the year: ₦68,000
- Discount received from suppliers: ₦2,000
- Goods returned to suppliers (returns outwards): ₦3,000
- Creditors balance at 31 December 2025: ₦22,000
- Cash purchases made during the year: ₦18,000

What is the total purchases figure for Kolawole Enterprises for the year ended 31 December 2025?

  1. A
    ₦80,000
  2. B
    ₦88,000
  3. ₦98,000Answer
  4. D
    ₦106,000

Answer

The total purchases figure for the year is ₦98,000.
The correct answer (₦98,000) is determined by reconstructing the Total Creditors Control Account to find credit purchases, then adding cash purchases. Sum of debit entries in the creditors control account is ₦68,000 + ₦2,000 + ₦3,000 + ₦22,000 = ₦95,000. Subtracting the opening balance of ₦15,000 yields credit purchases of ₦80,000. Adding cash purchases of ₦18,000 yields ₦98,000.

Step-by-Step Solution

1
Calculate credit purchases by preparing the Total Creditors Control Account.
Credit Purchases = ₦68,000 (Payments) + ₦2,000 (Discount Received) + ₦3,000 (Returns Outwards) + ₦22,000 (Closing Creditors) - ₦15,000 (Opening Creditors) = ₦80,000.
Debits to the Total Creditors Account include payments made, discounts received, returns outwards, and the closing balance. Deducting the opening credit balance gives the credit purchases for the period.
2
Calculate total purchases by adding cash purchases to credit purchases.
Total Purchases = Credit Purchases (₦80,000) + Cash Purchases (₦18,000) = ₦98,000.
Total purchases consist of all goods bought during the accounting period, whether paid for immediately in cash or acquired on credit.

Key Concept

Calculation of Total Purchases from Incomplete Records
Rate this question

Topics

Calculation of Total Sales and Total Purchases

More questions from this topic