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Difficulty: MediumPurchases Ledger Control Account

The following transaction balances were extracted from the books of Kalu Traders for the year ended 31st December 2025:

- Opening balance (credit): N18,500\text{N}18,500
- Credit purchases: N94,000\text{N}94,000
- Cash purchases: N12,500\text{N}12,500
- Returns outwards: N3,200\text{N}3,200
- Discount received: N1,800\text{N}1,800
- Cheques paid to creditors: N78,500\text{N}78,500
- Dishonoured cheques: N1,400\text{N}1,400
- Contra entry (set-off) with sales ledger: N2,400\text{N}2,400

What is the closing credit balance of the Purchases Ledger Control Account at 31st December 2025?

  1. N28,000\text{N}28,000Answer
  2. B
    N31,600\text{N}31,600
  3. C
    N40,500\text{N}40,500
  4. D
    N25,200\text{N}25,200

Answer

N28,000\text{N}28,000
The closing credit balance of N28,000\text{N}28,000 is determined by summing all credit entries (Opening Credit Balance of N18,500\text{N}18,500, Credit Purchases of N94,000\text{N}94,000, and Dishonoured Cheques of N1,400\text{N}1,400, totaling N113,900\text{N}113,900) and subtracting all debit entries (Cheques paid of N78,500\text{N}78,500, Returns outwards of N3,200\text{N}3,200, Discount received of N1,800\text{N}1,800, and Set-off of N2,400\text{N}2,400, totaling N85,900\text{N}85,900). Cash purchases of N12,500\text{N}12,500 are excluded as they do not affect creditor balances.

Step-by-Step Solution

1
Identify relevant credit items and calculate total credits.
Total Credits = Opening Credit Balance (N18,500\text{N}18,500) + Credit Purchases (N94,000\text{N}94,000) + Dishonoured Cheques (N1,400\text{N}1,400) = N113,900\text{N}113,900. Cash purchases are excluded because they do not involve credit suppliers.
Credit purchases increase amounts owed to suppliers, and dishonoured cheques reinstate the liability to creditors on the credit side.
2
Identify relevant debit items and calculate total debits.
Total Debits = Cheques paid to creditors (N78,500\text{N}78,500) + Returns outwards (N3,200\text{N}3,200) + Discount received (N1,800\text{N}1,800) + Contra entry (N2,400\text{N}2,400) = N85,900\text{N}85,900.
Payments, allowances, returns, and set-offs reduce the balance owed to creditors and are posted to the debit side of the account.
3
Subtract total debits from total credits to determine the closing credit balance.
Closing Credit Balance = N113,900−N85,900=N28,000\text{N}113,900 - \text{N}85,900 = \text{N}28,000.
The Purchases Ledger Control Account has a normal credit balance, calculated as total credit entries minus total debit entries.

Key Concept

Purchases Ledger Control Account Balancing
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Topics

Purchases Ledger Control Account

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