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Difficulty: MediumPurchases Ledger Control Account

The following transaction balances were extracted from the books of Bisi & Sons for the month of July 2026:

- Balance on Purchases Ledger Control Account at 1st July 2026 (Credit): N24,500\text{N}24,500
- Credit purchases for the month: N68,000\text{N}68,000
- Cash purchases: N12,000\text{N}12,000
- Discount received from suppliers: N1,800\text{N}1,800
- Returns outwards: N2,400\text{N}2,400
- Set-off against Sales Ledger Control Account: N3,500\text{N}3,500
- Interest charged by suppliers on overdue accounts: N600\text{N}600
- Balance on Purchases Ledger Control Account at 31st July 2026 (Credit): N21,400\text{N}21,400

What was the total amount paid to trade creditors during the month of July 2026?

  1. N64,000\text{N}64,000Answer
  2. B
    N62,800\text{N}62,800
  3. C
    N67,600\text{N}67,600
  4. D
    N76,000\text{N}76,000

Answer

N64,000\text{N}64,000
The correct figure of N64,000\text{N}64,000 is derived by properly constructing the Purchases Ledger Control Account. Credit items comprise the opening balance of N24,500\text{N}24,500, credit purchases of N68,000\text{N}68,000, and interest charged of N600\text{N}600, giving a total of N93,100\text{N}93,100. Subtracting the known debit entries—discount received (N1,800\text{N}1,800), returns outwards (N2,400\text{N}2,400), set-off (N3,500\text{N}3,500), and the closing credit balance (N21,400\text{N}21,400) totaling N29,100\text{N}29,100—yields the net cash paid to creditors of N64,000\text{N}64,000. Cash purchases of N12,000\text{N}12,000 are correctly ignored as they do not impact credit supplier accounts.

Step-by-Step Solution

1
Identify relevant credit side transactions
Opening credit balance (N24,500\text{N}24,500), credit purchases (N68,000\text{N}68,000), and interest charged by suppliers (N600\text{N}600). Cash purchases (N12,000\text{N}12,000) are excluded as they do not affect personal creditor accounts.
Control accounts only summarize transactions involving credit suppliers.
2
Calculate the total of the credit side
Total Credit Side=N24,500+N68,000+N600=N93,100\text{Total Credit Side} = \text{N}24,500 + \text{N}68,000 + \text{N}600 = \text{N}93,100.
These items increase the liability owed to trade creditors.
3
Calculate the known debit items plus closing credit balance
Known Debit Items=Discount received (N1,800)+Returns outwards (N2,400)+Set-off (N3,500)+Closing credit balance (N21,400)=N29,100\text{Known Debit Items} = \text{Discount received } (\text{N}1,800) + \text{Returns outwards } (\text{N}2,400) + \text{Set-off } (\text{N}3,500) + \text{Closing credit balance } (\text{N}21,400) = \text{N}29,100.
These items reduce total indebtedness or represent the remaining balance owed.
4
Deduct total known debit items from the credit side total to find cash paid to creditors
Cash Paid to Creditors=N93,100−N29,100=N64,000\text{Cash Paid to Creditors} = \text{N}93,100 - \text{N}29,100 = \text{N}64,000.
The Purchases Ledger Control Account must balance.

Key Concept

Purchases Ledger Control Account - Determining Missing Cash Payments to Suppliers
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Topics

Purchases Ledger Control Account

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