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Difficulty: Very hardControl Account Error Corrections and Ledger Reconciliation

The Sales Ledger Control Account of Bisi Enterprises showed a debit balance of ₦354,200 prior to reconciliation. An audit of the books revealed the following discrepancies:

1. A sales return of ₦14,600 was recorded in the Sales Returns Day Book as ₦16,400 and posted as such to the Sales Ledger Control Account.
2. Credit sales of ₦28,500 correctly recorded in the Sales Day Book were posted to the customer's personal account as ₦52,800.
3. Discount allowed of ₦6,400 correctly entered in the Cash Book was omitted from the Sales Ledger Control Account.
4. A dishonoured cheque of ₦12,200 received from a customer was correctly recorded in the Cash Book but posted to the credit side of the Sales Ledger Control Account.
5. A set-off (contra entry) of ₦8,500 between the sales ledger and purchases ledger was correctly posted in the Purchases Ledger Control Account but omitted entirely from the Sales Ledger Control Account.

Calculate the adjusted debit balance of the Sales Ledger Control Account.

Answer: 365500 ₦

Answer

The adjusted debit balance of the Sales Ledger Control Account is ₦365,500.
To obtain the adjusted debit balance of ₦365,500:
- Unadjusted Balance: ₦354,200 (Debit)
- Error 1 (Sales Return over-statement): Debit ₦1,800 (₦16,400 - ₦14,600)
- Error 2 (Personal Account error): ₦0 adjustment to Control Account
- Error 3 (Discount Allowed omitted): Credit ₦6,400
- Error 4 (Dishonoured Cheque on wrong side): Debit ₦24,400 (2 × ₦12,200)
- Error 5 (Contra Entry omitted): Credit ₦8,500

Net calculation: ₦354,200 + ₦1,800 - ₦6,400 + ₦24,400 - ₦8,500 = ₦365,500.

Step-by-Step Solution

1
Determine the effect of the sales return recording error.
Sales returns reduce debtors and belong on the credit side of the Sales Ledger Control Account. Since ₦16,400 was credited instead of ₦14,600, the control account was over-credited by ₦1,800. Correcting this requires a debit adjustment of ₦1,800.
Debiting the account by the difference of ₦1,800 reduces the excess credit entry.
2
Evaluate the customer personal account posting error.
No adjustment to the Sales Ledger Control Account (₦0).
Errors made in posting to individual customer accounts alter the total of the list of debtors, but do not affect the control account because control accounts are posted from totals of books of prime entry.
3
Account for omitted discount allowed.
Credit the Sales Ledger Control Account with ₦6,400.
Discount allowed reduces total trade receivables and must be posted on the credit side of the Sales Ledger Control Account.
4
Correct the dishonoured cheque posted to the wrong side of the control account.
Debit the Sales Ledger Control Account with ₦24,400.
Dishonoured cheques reinstate debt and should be debited to the control account. Posting ₦12,200 to the credit side created a ₦12,200 deficit; hence a debit entry of twice the amount (2 × ₦12,200 = ₦24,400) is required to reverse the credit and apply the debit.
5
Post the omitted set-off (contra entry).
Credit the Sales Ledger Control Account with ₦8,500.
Contra entries reduce both debtors and creditors, requiring a credit entry in the Sales Ledger Control Account.
6
Calculate the final corrected balance.
₦354,200 + ₦1,800 - ₦6,400 + ₦24,400 - ₦8,500 = ₦365,500.
Summing the initial balance and all net debit and credit adjustments yields the true corrected balance.

Key Concept

Sales Ledger Control Account Error Corrections and Ledger Reconciliation
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Topics

Control Account Error Corrections and Ledger Reconciliation

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