The following information in respect of June 20.1 was obtained from the records of N Nelson:
Balance of trade payables control account - 31 May 20.1
R
16 571
Totals for the month
Cash payments journal:
Trade payables column
Settlement discount received column
Purchases journal
Purchases returns journal
General journal:
Certain accounts with debit balances transferred to trade receivables ledger from trade payables ledger
List of individual creditors per trade payables ledger.
14 326
1 673
17 350
3 750
46
Credit balances
Debit balances
16 812
110
In the process of reconciling the balances on the creditors control account with the list of individual balances per creditors ledger, the following errors were discovered:
(a) An invoice for R1 787, which had been entered correctly in the purchases journal was entered against the account of Tims Ltd as R1 878.
(b) Credit note No 63 for R60 was entered correctly in the purchases returns journal, but erroneously posted as a credit to the account of Ewing Ltd.
(c) A cheque for R90 paid to M Sorry was entered on the debit side of S Sorry's account.
(d) The total of the list of trade payables balances was overcast by R500.
(e) The total of the purchases journal was undercast by R100.
REQUIRED
(1) Prepare the trade payables control account as at 30 June 20.1, properly balanced. The first word(s) of each entry must indicate the contra ledger account.
(2) Reconcile the total of the list of trade payables balances with the balance of the trade payables control account as determined in (1) above.
Answer (1)
To address the question, we need to prepare the trade payables control account for the month of June and then reconcile it with the list of trade payables balances.
Step 1: Prepare the Trade Payables Control Account
Trade Payables Control Account for June 20.1:
Debit Side:
Balance c/d (carried down): R 16 , 812
Credit Side:
Balance b/d (brought down) from 31 May: R 16 , 571
Purchases Journal (Credit Purchases): R 17 , 350
Cash Payments Journal (Trade Payables Column): R 14 , 326
Settlement Discount Received: R 1 , 673
Purchases Returns Journal: R 3 , 750
Adjustments:
Correcting Invoice for Tims Ltd: Decrease by R 91 ( R 1 , 878 − R 1 , 787 )
Correct the error of R 60 not posted (Credit Note No 63)
Overcast correction: R 500 overlooked (add to debit side)
Total of Purchases Journal undercast: R 100 added (correcting undercast)
Step 2: Reconciliation
Total of Credit Balances (List): R 16 , 812
Total of Debit Balances: R 110
Total Errors and Adjustments Impact on Control Account:
Overcast of balances by R 500 (Add to trade payables)
Undercast purchases journal increased trade payables by R 100 (Add to purchases)
Thus, you reconcile the trade payables list with the control account by considering the adjustments for errors:
Adjusted Credit Balances:
Overcast to be adjusted by R 500 upon correction
Net balance on Control Account:
Final reconciled balance: : R 16 , 812
The completion of these entries will ensure that the trade payables ledger aligns with individual ledger balances by matching the totals including adjustments for errors.
