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Difficulty: MediumContra Entries and Set-offs

On 1st January 2026, Bamidele Enterprises recorded a credit balance of N215,000\text{N}215,000 in its Purchases Ledger Control Account. During the year ended 31st December 2026, credit purchases amounted to N480,000\text{N}480,000, payments to trade creditors by bank were N410,000\text{N}410,000, returns outwards totaled N25,000\text{N}25,000, and discount received was N18,000\text{N}18,000. Additionally, a contra entry of N32,000\text{N}32,000 was agreed to set off accounts between the sales ledger and purchases ledger. What is the closing credit balance of the Purchases Ledger Control Account as at 31st December 2026?

Answer: 210000 Naira

Answer

The closing credit balance of the Purchases Ledger Control Account as at 31st December 2026 is N210,000.
In the Purchases Ledger Control Account, the opening credit balance (N215,000) and credit purchases (N480,000) total N695,000 on the credit side. Deducting the debit entries—bank payments (N410,000), returns outwards (N25,000), discount received (N18,000), and the contra set-off entry (N32,000)—gives a total deduction of N485,000, leaving a net closing credit balance of N210,000.

Step-by-Step Solution

1
Sum all credit entries in the Purchases Ledger Control Account.
Total Credit Side = N215,000 (Opening Balance) + N480,000 (Credit Purchases) = N695,000.
Opening credit balance and credit purchases increase the liability to creditors on the credit side of the Purchases Ledger Control Account.
2
Sum all debit entries including payments, returns, discounts received, and contra set-offs.
Total Debit Side = N410,000 (Bank Payments) + N25,000 (Returns Outwards) + N18,000 (Discount Received) + N32,000 (Contra Entry) = N485,000.
Payments, returns, discount received, and contra entries reduce the total liability owed to suppliers and are debited to the control account.
3
Deduct total debit entries from total credit entries to calculate the ending balance.
Closing Balance = N695,000 - N485,000 = N210,000.
The balance remaining on the credit side represents the net closing liability to trade creditors at the end of the accounting period.

Key Concept

Accounting treatment of contra entries and set-offs in the Purchases Ledger Control Account
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Topics

Contra Entries and Set-offs

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