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Difficulty: MediumPurchases Ledger Control Account

An enterprise extracted the following balance details regarding its trade creditors for the month of June 2026:

- Opening credit balance: N14,500\text{N}14,500
- Opening debit balance: N350\text{N}350
- Total credit purchases: N86,200\text{N}86,200
- Cash purchases of merchandise: N12,000\text{N}12,000
- Purchase of office equipment on credit: N5,000\text{N}5,000
- Returns outwards: N3,400\text{N}3,400
- Cheques paid to trade creditors: N71,800\text{N}71,800
- Discounts received from suppliers: N2,100\text{N}2,100
- Set-off contra entry with sales ledger: N1,500\text{N}1,500
- Closing debit balance: N200\text{N}200

What is the closing credit balance of the Purchases Ledger Control Account at the end of June 2026?

  1. \text{N}21,750Answer
  2. B
    \text{N}26,750
  3. C
    \text{N}25,950
  4. D
    \text{N}33,750

Answer

\text{N}21,750
The correct closing credit balance is N21,750\text{N}21,750. This is determined by taking total credits of N100,900\text{N}100,900 (opening credit balance N14,500\text{N}14,500 + credit purchases N86,200\text{N}86,200 + closing debit balance N200\text{N}200) and subtracting total debit entries of N79,150\text{N}79,150 (opening debit balance N350\text{N}350 + payments N71,800\text{N}71,800 + returns outwards N3,400\text{N}3,400 + discounts received N2,100\text{N}2,100 + contra set-off N1,500\text{N}1,500). Cash purchases and capital asset purchases are correctly excluded.

Step-by-Step Solution

1
Filter out irrelevant non-trade items
Cash purchases (N12,000\text{N}12,000) are excluded because cash transactions do not affect trade creditors. Credit purchase of office equipment (N5,000\text{N}5,000) is excluded because non-current asset purchases are recorded in the general journal and non-current asset ledger, not the purchases ledger.
The Purchases Ledger Control Account exclusively records transactions involving trade creditors for goods bought for resale on credit.
2
Sum all entries on the credit side of the account
Credit Total=Opening Credit Balance(N14,500)+Credit Purchases(N86,200)+Closing Debit Balance(N200)=N100,900\text{Credit Total} = \text{Opening Credit Balance} (\text{N}14,500) + \text{Credit Purchases} (\text{N}86,200) + \text{Closing Debit Balance} (\text{N}200) = \text{N}100,900
Credit entries increase trade creditor liability or represent carried forward debit balances.
3
Sum all known debit entries
Debit Entries=Opening Debit Balance(N350)+Cheques Paid(N71,800)+Returns Outwards(N3,400)+Discounts Received(N2,100)+Contra Set-off(N1,500)=N79,150\text{Debit Entries} = \text{Opening Debit Balance} (\text{N}350) + \text{Cheques Paid} (\text{N}71,800) + \text{Returns Outwards} (\text{N}3,400) + \text{Discounts Received} (\text{N}2,100) + \text{Contra Set-off} (\text{N}1,500) = \text{N}79,150
Debit entries reduce liability to trade creditors.
4
Calculate the missing closing credit balance (carried forward to debit side to balance)
Closing Credit Balance=N100,900−N79,150=N21,750\text{Closing Credit Balance} = \text{N}100,900 - \text{N}79,150 = \text{N}21,750
The balance balancing the control account represents the net remaining liability owed to trade creditors.

Key Concept

Purchases Ledger Control Account Balancing
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Topics

Purchases Ledger Control Account

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