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Difficulty: EasyControl Account Error Corrections and Ledger Reconciliation

The Sales Ledger Control Account of Tari Traders showed a debit balance of ₦145,000\text{₦}145,000. It was subsequently discovered that a sales returns figure of ₦3,500\text{₦}3,500 had been posted to the debit side of the control account instead of the credit side. What is the corrected balance of the Sales Ledger Control Account?

  1. ₦138,000\text{₦}138,000Answer
  2. B
    ₦141,500\text{₦}141,500
  3. C
    ₦148,500\text{₦}148,500
  4. D
    ₦152,000\text{₦}152,000

Answer

The corrected balance of the Sales Ledger Control Account is ₦138,000\text{₦}138,000.
Sales returns belong on the credit side of the Sales Ledger Control Account because they reduce total debtors. When an item of ₦3,500\text{₦}3,500 is incorrectly debited instead of credited, the debit balance is inflated by ₦7,000\text{₦}7,000 (₦3,500\text{₦}3,500 to neutralize the debit plus ₦3,500\text{₦}3,500 for the actual credit). Thus, deducting ₦7,000\text{₦}7,000 from ₦145,000\text{₦}145,000 gives the corrected balance of ₦138,000\text{₦}138,000.

Step-by-Step Solution

1
Identify the nature of the error and its impact on the control account
Sales returns reduce trade receivables and belong on the credit side. Being wrongly posted to the debit side means the debit balance was overstated by double the transaction value (2×₦3,500=₦7,0002 \times \text{₦}3,500 = \text{₦}7,000).
Correcting a reverse side placement requires canceling the wrong debit entry (₦3,500\text{₦}3,500) and making the proper credit entry (₦3,500\text{₦}3,500).
2
Calculate the corrected debit balance
₦145,000−₦7,000=₦138,000\text{₦}145,000 - \text{₦}7,000 = \text{₦}138,000.
Deducting the total correction of ₦7,000\text{₦}7,000 restores the control account to its true balance.

Key Concept

Correcting complete reversal errors in control accounts requires adjusting by double the amount of the error.
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Topics

Control Account Error Corrections and Ledger Reconciliation

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