ABFA1163 FINANCIAL ACCOUNTING II 1

Lecture 4: Control Accounts (b) Posting error (i.e. wrong amount posted or omitted in the
subsidiary ledger)
1. Correction of errors
Effect
▪ The control accounts should be closed and balanced regularly, at Error in the subsidiary ledger account. The sum of balances
least monthly, and the balance agreed with the sum of the individual extracted from the subsidiary ledger does not agree with the
receivables’ and payables’ balances extracted from Sales and control account.
Purchases Ledgers respectively.
Adjustment
▪ However, in practice, often, the balance on the control account does No accounting entry is required since the subsidiary ledger is
not agree with the sum of balances extracted. This may due to the not part of the double-entry system. Correction of error to be
following reasons: made directly inside the subsidiary ledger.
投放错误
(a) Casting error in the books of prime entry (i.e. error in adding Approach in correcting the error
up the total) Adjust the statement of balances in the subsidiary ledger.

Effect
The General Ledger debit and credit posting will balance, but
the amount posted is wrong. Postings of individual
transactions to the subsidiary ledger are correct. Therefore,
control account does not agree with the subsidiary ledger.
Adjustment
A journal entry must be made in the General Ledger to correct
the amount.
Approach in correcting the error
Adjust the control account.
(c) Error of original entry (i.e. wrong amount recorded or omitted
in the books of prime entry)
Effect
Error in both the subsidiary ledger and General Ledger.
Balance in control account will agree with the sum of balances
extracted from the subsidiary ledger.
Adjustment
A journal entry is required to correct the General Ledger and
an additional correction is required directly in the subsidiary
ledger.

Approach in correcting the error

i. Adjust the control account; and
ii. Adjust the statement of balances in the subsidiary ledger
ABFA1163 FINANCIAL ACCOUNTING II 2

Lecture Illustration 1

In preparing the accounts for the year ended 31 Oct, the Accounts Executive (a)
of Chili Padi Enterprise has ascertained that the trade payables control Chili Padi Enterprise
account balance of RM71,900 does not agree with the balances as extracted Statement of Adjusted Trade Payables Listing
from the Purchases Ledger of RM68,700. Upon investigation, the following as at 31 October
errors were discovered: RM RM
Total as per Purchases Ledger 68,700
1. A vehicle bought on credit for RM5,000 had been credited to the trade Add: (6) Payables account balance omitted 7,500
payables control account.vehicle not related to trade payables so need
to minus out from trade payables acc
(8) Payables account balance undercast 500 8,000
76,700
2. Returns outwards of RM1,500 had been omitted from the trade payables Less: (3) Payment omitted 2,000
control account. (5) Contra omitted 1,000 (3,000)
Revised balance in Purchases Ledger 73,700
3. A cheque for RM2,000 payable to Lee had not been debited to his
account in the purchases ledger.
(b)
4. Discount received of RM300 had been entered twice in the trade Trade Payables Control Account
payables control account. Oct RM Oct RM
31 (1) Vehicle: error 5,000 31 Balance b/d 71,900
5. A contra arrangement of RM1,000 with a trade receivable had not been “ (2) Returns outwards 1,500 “ (4) Disc. rec’d o/stated 300
set off in the purchases ledger. “ Balance c/d 73,700 “ (7) Purchases omitted 8,000
省略 80,200 80,200
6. A personal account with a balance of RM7,500 had been omitted from
Nov
the Purchases Ledger balances.
1 Balance b/d 73,700
7. Purchases of RM8,000 for the month of Jan had not been credited to the
trade payables control account.

8. Shima’s account in the Purchases Ledger had been undercast by RM500.

Required:
Show the necessary adjustments to:
(a) The total of balances as extracted from the Purchases Ledger,
(b) The balance in the trade payables control account.
ABFA1163 FINANCIAL ACCOUNTING II 3

Lecture illustration 2

Arif Enterprise sells goods on credit to most of its customers. In order to (a)
control its receivables collection system, a trade receivables control account Arif Enterprise
is maintained. In preparing the accounts for the year ended 31 March, the Statement of Adjusted Trade Receivables Listing
Accountant discovers that the total of all the personal accounts in the Sales as at 31 March
Ledger amounts to RM12,802, whereas the balance on the trade receivables RM RM
control account is RM12,550. Total as per Sales Ledger 12,802
Add: (2) Receivables account balance omitted 300
Upon investigating the matter, the following errors were discovered: (5) Receivables account balance undercast 200 500
1. Sales for the week ending 27 Mar amounting to RM850 had been 13,302
omitted from the control account. Dr Less: (3) Cash received understated (750-570) 180
2. A receivables account balance of RM300 had not been included in the (8) Cash received wrongly debited 500
list of balances. [should be credit RM250] (250 x 2)
3. Cash received of RM750 had been entered in a personal account as (9) Discount received wrongly debited 50
RM570. [should be debited to Purchases Ledger]
4. Discount allowed totalling RM100 had not been entered in the control (11) Cash received understated (80-8) 72 (802)
account. Revised balance in Sales Ledger 12,500
5. A personal account balance had been undercast by RM200.
6. A contra item of RM400 with the Purchases Ledger had not been
entered in the control account. (b)
7. A bad debt of RM500 had not been entered in the control account. 欠商家越来越少钱 欠商家越来越多钱
Trade Receivables Control Account
8. Cash received of RM250 had been debited to a personal account. Mar RM Mar RM
9. Discount received of RM50 had been debited to Bakar’s sales ledger 31 Bal b/d 12,550 31 (4) Discount allowed 100
account. “ (1) Sales omitted 850 “ (6) Contra 400
10. Returns inward valued at RM200 had not been included in the control “ (12) Dishonoured cheque 300 “ (7) Bad debts 500
account. “ (10) Returns inwards 200
11. Cash received of RM80 had been credited to a personal account as RM8.加多了 “ Bal c/d 12,500
12. A cheque for RM300 received from a customer had been dishonoured 13,700 13,700
by the bank, but no adjustment had been made in the control account.
Apr
1 Bal b/d 12,500
Required:
(a) Prepare a statement showing the adjustments that are necessary to the
list of personal account balances in the Sales Ledger.

(b) Prepare a corrected trade receivables control account.

ABFA1163 FINANCIAL ACCOUNTING II 4

Lecture illustration 3
(a)
The total in the Trade Receivables Control Account of Teras Maju Teras Maju Enterprise
Enterprise does not balance with the total balances from the receivables list. Statement of Adjusted Trade Receivables Listing
On investigation, the following errors were found: as at …
RM RM
1 An invoice of RM480 to Hassan has not been posted to his account. Total as per Sales Ledger 47,360
Add: (1) Sales invoice not posted 480
2 The balance of RM1,264 due from Mansor Cafe was omitted from the (2) Balance omitted 1,264
list of balances. (5) Balance understated (970-790) 180 1,924
49,284
3 The Sales Journal total was overcast by RM1,200. Less: (6) Discount wrongly debited 136
[should be credit] (68 x 2)
4 A contra of RM1,314 was omitted from the control account. (7) Debit side overcast 120 (256)
Revised balance in Sales Ledger 49,028
5 Wendy’s balance of RM970 had been brought down as RM790.

6 Discount allowed of RM68 had been debited to Benny’s account. (b)

Trade Receivables Control Account
7 The debit side of Peter’s account had been overcast by RM120.
RM RM
Balance b/d 51,742 (3) Sales Journal o/cast 1,200
8 A bad debt of RM200 was entered into Azman’s account but had not
(4) Contra omitted 1,314
been entered into the control account.
(8) Bad debts 200
Balance c/d 49,028
9 A cash refund of RM72 had been made to Ben, entered into his account
and in the control account but no credit note had been raised. 51,742 51,742
Balance b/d 49,028
Required:

(a) Prepare a revised list of trade receivables balances, with the original
total of RM47,360.
(b) Prepare a revised trade receivables control account, with the original
balance of RM51,742.
Note:
(9) No adjustment is required because the credit note is raised as a source
document to record the transaction. In this case, the transaction has
been completely recorded in the Cash Book and both ledgers.