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Difficulty: MediumContra Entries and Set-offs

Kolawole Traders maintains control accounts for its ledgers. On 31st December 2025, the balance on the Sales Ledger Control Account before adjustments was N185,000\text{N}185,000 (debit). A contra entry of N14,000\text{N}14,000 is to be set off between a customer's account in the sales ledger and their creditor account in the purchases ledger. What is the revised balance of the Sales Ledger Control Account after posting this set-off?

  1. N171,000\text{N}171,000 debitAnswer
  2. B
    N199,000\text{N}199,000 debit
  3. C
    N171,000\text{N}171,000 credit
  4. D
    N199,000\text{N}199,000 credit

Answer

N171,000\text{N}171,000 debit
A contra entry (set-off) reduces both trade debtors and trade creditors. To record a set-off in the control accounts, the Sales Ledger Control Account is credited and the Purchases Ledger Control Account is debited. Deducting the N14,000\text{N}14,000 credit set-off from the opening debit balance of N185,000\text{N}185,000 results in a revised balance of N171,000\text{N}171,000 debit.

Step-by-Step Solution

1
Determine the double entry rule for a contra entry between control accounts
Debit Purchases Ledger Control Account and Credit Sales Ledger Control Account by N14,000\text{N}14,000.
A set-off reduces total debtors and total creditors simultaneously. Therefore, the Sales Ledger Control Account must be credited.
2
Calculate the adjusted balance on the Sales Ledger Control Account
N185,000 (debit)−N14,000 (credit)=N171,000 (debit)\text{N}185,000 \text{ (debit)} - \text{N}14,000 \text{ (credit)} = \text{N}171,000 \text{ (debit)}
Crediting a debit-balance account reduces the balance.

Key Concept

Accounting treatment of contra entries in control accounts
Estimated Time:1m 30s
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Topics

Contra Entries and Set-offs

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