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Difficulty: MediumControl Account Error Corrections and Ledger Reconciliation

Prior to reconciliation, the Sales Ledger Control Account of Folake Enterprises showed a debit balance of ₦540,000 on 31 December 2025. Upon auditing the books, the following errors were discovered:

1. The sales journal total was understated by ���9,000.
2. A customer's dishonoured cheque of ₦14,000 recorded in the cash book was not posted to the control account.
3. A contra set-off of ₦6,000 between the sales and purchases ledgers was omitted from the control account.
4. Total discount allowed of ₦3,500 was wrongly posted to the debit side of the control account.

What is the correct adjusted balance of the Sales Ledger Control Account?

Answer: 550000 ₦

Answer

The correct adjusted balance of the Sales Ledger Control Account is ₦550,000.
The unadjusted debit balance of ₦540,000 is increased by ₦9,000 for understated sales and ₦14,000 for the dishonoured cheque, and decreased by ₦6,000 for the omitted contra entry and ₦7,000 for correcting the misposted discount allowed (deducting ₦3,500 to reverse the wrong debit and ₦3,500 to credit it properly). This yields an adjusted debit balance of ₦550,000.

Step-by-Step Solution

1
Identify initial balance and direction
Unadjusted debit balance = ₦540,000
The Sales Ledger Control Account normally carries a debit balance representing total trade debtors.
2
Adjust for understated sales journal total
Add ₦9,000 to debit balance
Understating sales means total debtors were understated; increasing sales increases the control account debit.
3
Adjust for dishonoured cheque
Add ₦14,000 to debit balance
A dishonoured cheque reinstates the debtor's debt, requiring a debit entry in the Sales Ledger Control Account.
4
Adjust for omitted contra entry
Deduct ₦6,000 from debit balance
Contra set-offs reduce amounts owed by debtors against amounts owed to them as creditors, requiring a credit entry.
5
Correct misposted discount allowed
Deduct ₦7,000 from debit balance
Discount allowed reduces debtors (credit side). Debiting ₦3,500 requires a credit adjustment of ₦7,000 (₦3,500 to cancel the error plus ₦3,500 for the correct posting).
6
Compute total adjusted balance
540,000 + 9,000 + 14,000 - 6,000 - 7,000 = ₦550,000
Summing all debit additions and credit deductions yields the true adjusted control balance.

Key Concept

Adjustment of Sales Ledger Control Account for Errors and Omissions
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Topics

Control Account Error Corrections and Ledger Reconciliation

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