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Difficulty: Very hardPurchases Ledger Control Account

The following information was extracted from the financial records of Chukwu & Co. for the month of May 2026:

- Opening Purchases Ledger balances: Credit balance N45,000N45,000; Debit balance N1,200N1,200
- Credit purchases at list price (subject to 10%10\% trade discount): N120,000N120,000
- Cash purchases: N15,000N15,000
- Payments made to trade creditors: N82,000N82,000
- Discount received from suppliers: N3,400N3,400
- Bills payable accepted by the firm: N12,000N12,000
- Contra entry set-off with Sales Ledger: N4,500N4,500
- Interest charged by trade creditors on overdue accounts: N800N800
- Refund received in cash from suppliers for overpayment: N1,200N1,200
- Carriage outwards paid: N3,500N3,500
- Closing Purchases Ledger debit balance: N900N900

What is the closing credit balance of the Purchases Ledger Control Account at the end of May 2026?

  1. N52,800Answer
  2. B
    N59,600
  3. C
    N67,800
  4. D
    N51,500

Answer

The closing credit balance of the Purchases Ledger Control Account is N52,800.
To determine the closing credit balance of the Purchases Ledger Control Account, credit entries (which increase the liability to creditors) and debit entries (which reduce the liability) must be accumulated. Net credit purchases equal N108,000N108,000 (N120,000N120,000 list price less 10%10\% trade discount). The credit side contains: Opening Credit Balance (N45,000N45,000), Net Credit Purchases (N108,000N108,000), Interest Charged (N800N800), Supplier Refund (N1,200N1,200), and Closing Debit Balance (N900N900), totaling N155,900N155,900. The debit side before balancing contains: Opening Debit Balance (N1,200N1,200), Payments (N82,000N82,000), Discount Received (N3,400N3,400), Bills Payable (N12,000N12,000), and Contra Entry (N4,500N4,500), totaling N103,100N103,100. Subtracting the debit subtotal from the credit total yields the correct closing credit balance of N52,800N52,800. Cash purchases (N15,000N15,000) and carriage outwards (N3,500N3,500) are non-ledger control items and must be excluded.

Step-by-Step Solution

1
Calculate Net Credit Purchases and filter out non-relevant transactions
Net Credit Purchases = N120,000−(10%×N120,000)=N108,000N120,000 - (10\% \times N120,000) = N108,000. Cash purchases (N15,000N15,000) and carriage outwards (N3,500N3,500) are excluded because cash purchases do not affect trade creditors and carriage outwards is a distribution expense.
Control accounts only record credit purchases net of trade discount.
2
Sum all items posted to the Credit side of the Purchases Ledger Control Account
Credit Total = Opening Credit Balance (N45,000N45,000) + Net Credit Purchases (N108,000N108,000) + Interest Charged by Creditors (N800N800) + Cash Refund for Overpayment (N1,200N1,200) + Closing Debit Balance (N900N900) = N155,900N155,900.
These items increase the liability to creditors or account for debit balance carry-forwards.
3
Sum all items posted to the Debit side of the Purchases Ledger Control Account before balancing
Debit Subtotal = Opening Debit Balance (N1,200N1,200) + Payments to Creditors (N82,000N82,000) + Discount Received (N3,400N3,400) + Bills Payable Accepted (N12,000N12,000) + Contra Set-off (N4,500N4,500) = N103,100N103,100.
These items reduce the liability to trade creditors or account for opening debit balances.
4
Calculate the closing credit balance (Balance c/d)
Closing Credit Balance = N155,900−N103,100=N52,800N155,900 - N103,100 = N52,800.
The balance required to equate the debit and credit totals represents the final net amount owed to creditors.

Key Concept

Purchases Ledger Control Account Balancing and Item Placement
Estimated Time:2m 0s
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Purchases Ledger Control Account

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