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Difficulty: EasySales Ledger Control Account

Match each transaction or item related to the Sales Ledger Control Account on the left with its correct accounting entry side and effect on the right.

  • Credit salesDebited to the control account as an increase in trade debtors
  • Dishonoured customer chequesDebited to the control account to reinstate the debt previously credited
  • Discount allowedCredited to the control account as a reduction in debtors balance due to prompt payment
  • Bad debts written offCredited to the control account to write off irrecoverable debt

Answer

Credit sales are debited to increase trade debtors; Dishonoured cheques are debited to reinstate customer debts; Discount allowed is credited to record reductions for prompt payment; Bad debts written off are credited as irrecoverable debt reductions.
In the Sales Ledger Control Account, items that increase receivables (such as credit sales and dishonoured cheques) are debited. Items that decrease receivables (such as discount allowed, cash received, set-offs, and bad debts written off) are credited.

Step-by-Step Solution

1
Identify the nature of the Sales Ledger Control Account.
The Sales Ledger Control Account acts as an asset account representing total trade debtors (receivables), having a normal debit balance.
Understanding the account type establishes that increases in debtors are debited and decreases are credited.
2
Analyze debit entries (items that increase or reinstate trade debtors).
Credit sales increase debtors balance (debited). Dishonoured cheques reverse a prior payment credit, restoring the debt (debited).
Transactions adding to the claim on customers belong on the debit side.
3
Analyze credit entries (items that reduce trade debtors).
Discount allowed reduces the debt owed upon settlement (credited). Bad debts written off permanently remove uncollectible debt from receivables (credited).
Transactions reducing the claim on customers belong on the credit side.

Key Concept

Classification of entries in the Sales Ledger Control Account
Estimated Time:1m 0s
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Topics

Sales Ledger Control Account

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