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Difficulty: MediumControl Account Error Corrections and Ledger Reconciliation

Before reconciliation, the Sales Ledger Control Account of Okafor Enterprises showed a debit balance of ₦195,000\text{₦}195,000. A detailed investigation revealed the following errors:

1. The total of the sales journal was understated by ₦15,000\text{₦}15,000.
2. A dishonoured cheque of ₦8,000\text{₦}8,000 received from a customer had been mistakenly credited to the Sales Ledger Control Account.

What is the correct balance of the Sales Ledger Control Account after adjusting for these errors?

  1. ₦226,000\text{₦}226,000Answer
  2. B
    ₦218,000\text{₦}218,000
  3. C
    ₦202,000\text{₦}202,000
  4. D
    ₦194,000\text{₦}194,000

Answer

The correct balance of the Sales Ledger Control Account is ₦226,000\text{₦}226,000.
The Sales Ledger Control Account carries a debit balance representing trade debtors. Understated sales of ₦15,000\text{₦}15,000 must be debited to increase the total debtors balance. When a dishonoured cheque of ₦8,000\text{₦}8,000 is erroneously credited, the debit side is short by ₦16,000\text{₦}16,000 (₦8,000\text{₦}8,000 to remove the credit entry plus ₦8,000\text{₦}8,000 for the proper debit entry). Adding ₦15,000\text{₦}15,000 and ₦16,000\text{₦}16,000 to the initial balance of ₦195,000\text{₦}195,000 gives ₦226,000\text{₦}226,000.

Step-by-Step Solution

1
Identify the unadjusted debit balance
Unadjusted balance = ₦195,000\text{₦}195,000 (debit)
The initial ledger balance before error correction.
2
Adjust for the understated sales journal total
Add ₦15,000\text{₦}15,000 to the debit side
Credit sales increase debtors, so an understatement in the sales journal requires an additional debit entry.
3
Correct the misposted dishonoured cheque
Add 2×₦8,000=₦16,0002 \times \text{₦}8,000 = \text{₦}16,000 to the debit side
A dishonoured cheque reinstates a debt and must be debited. Since it was erroneously credited, adding ₦16,000\text{₦}16,000 cancels the ₦8,000\text{₦}8,000 credit and applies the correct ₦8,000\text{₦}8,000 debit.
4
Calculate the final corrected balance
₦195,000+₦15,000+₦16,000=₦226,000\text{₦}195,000 + \text{₦}15,000 + \text{₦}16,000 = \text{₦}226,000
Summing all required debit adjustments yields the adjusted control account balance.

Key Concept

Correcting errors on control accounts requires doubling the adjustment amount when an item has been posted to the wrong side of the ledger.
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Topics

Control Account Error Corrections and Ledger Reconciliation

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