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Difficulty: MediumSales Ledger Control Account

An accountant extracted the following ledger summary for the trading period of Chukwu Enterprises:

- Debtors balance (1 Jan): Debit balance ₦12,500\text{₦}12,500, Credit balance ₦400\text{₦}400
- Credit sales: ₦55,000\text{₦}55,000
- Cash and cheques received from debtors: ₦48,200\text{₦}48,200
- Returns inwards: ₦1,600\text{₦}1,600
- Discount allowed: ₦950\text{₦}950
- Dishonoured cheques from customer accounts: ₦1,200\text{₦}1,200
- Bad debts written off: ₦800\text{₦}800
- Provision for doubtful debts: ₦500\text{₦}500
- Set-off contra entry with Purchases Ledger: ₦1,100\text{₦}1,100
- Cash refunds to credit customers: ₦350\text{₦}350
- Debtors credit balance (31 Dec): ₦250\text{₦}250

What is the closing debit balance of the Sales Ledger Control Account at 31 December?

  1. ₦16,250Answer
  2. B
    ₦15,750
  3. C
    ₦13,850
  4. D
    ₦18,150

Answer

The closing debit balance of the Sales Ledger Control Account is ₦16,250.
The correct closing debit balance is ₦16,250. Summing all debit side postings gives ₦12,500 (opening Dr) + ₦55,000 (credit sales) + ₦1,200 (dishonoured cheques) + ₦350 (cash refunds) + ₦250 (closing Cr balance) = ₦69,300. Subtracting the credit side postings of ₦400 (opening Cr balance) + ₦48,200 (cash received) + ₦1,600 (returns inwards) + ₦950 (discount allowed) + ₦800 (bad debts) + ₦1,100 (contra set-off) = ₦53,050 leaves a closing debit balance of ₦16,250. Provision for doubtful debts is correctly ignored.

Step-by-Step Solution

1
Identify items to be posted to the Debit side of the Sales Ledger Control Account
Debit items: Opening Debit Balance (₦12,500\text{₦}12,500), Credit Sales (₦55,000\text{₦}55,000), Dishonoured Cheques (₦1,200\text{₦}1,200), Cash Refunds to Debtors (₦350\text{₦}350), and Closing Credit Balance (₦250\text{₦}250). Total Debit Side = ₦69,300\text{₦}69,300.
Debit side represents increases in total amounts owed by trade debtors plus balances brought down.
2
Identify items to be posted to the Credit side of the Sales Ledger Control Account
Credit items: Opening Credit Balance (₦400\text{₦}400), Cash and Cheques Received (₦48,200\text{₦}48,200), Returns Inwards (₦1,600\text{₦}1,600), Discount Allowed (₦950\text{₦}950), Bad Debts Written Off (₦800\text{₦}800), and Contra Set-off (₦1,100\text{₦}1,100). Total Known Credit Items = ₦53,050\text{₦}53,050.
Credit side represents reductions in total amounts owed by trade debtors.
3
Exclude non-control account items
Provision for doubtful debts (₦500\text{₦}500) is excluded completely from the Sales Ledger Control Account.
Provision for doubtful debts is an adjustment made in final accounts and ledger, not entered into the sales ledger control account.
4
Calculate the closing debit balance
Closing Debit Balance = Total Debit Side - Total Credit Side = ₦69,300−₦53,050=₦16,250\text{₦}69,300 - \text{₦}53,050 = \text{₦}16,250.
The balancing figure on the credit side represents the closing debit balance of trade debtors.

Key Concept

Sales Ledger Control Account preparation and item classification
Estimated Time:1m 30s
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Topics

Sales Ledger Control Account

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