Control accounts

You are employed as a financial accountant for Mwiinga, a sole trader who has engaged two
trainee accounting clerks, Musonda and Maboshe. As Mwiinga operates an integrated
computerized system for payables and receivables, he has divided responsibilities for
Receivables and payables control accounts and personal accounts of customers and suppliers
between the two trainees as follows:
Musonda – responsible for preparation and maintenance of control accounts for receivables
and payables in the nominal ledger Maboshe – Responsible for recording and maintaining the
receivables and payables ledger.
It is at end of the accounting year and you have just discovered that the following errors have
been committed by Musonda and Maboshe:
(i) Sales invoices totaling K600,000 had been omitted from Mwiinga’s accounting records.
(ii) Irrecoverable debts of K12,000 were not recorded in the general ledger.
(iii) One of Mwiinga’s suppliers gave him a cash discount of K20,000 which both his trainee
accountants recorded as though it was a purchase invoice.
(iv) A contra entry offsetting a balance of K150,000 due to a supplier against the receivables
ledger account for the same company had not been recorded in the control accounts.
(v) One of the purchase invoices for K175,300 was entered in the accounting records as
K153,700.
(vi) One of the entries in the purchases day book was entered as K76,500 instead of K67,500.
(vii) One account balance in the receivables ledger was overstated by K8,000.
(viii) A payment made to a supplier of K225,000 was treated as if it was a receipt from a
customer. The control accounts were otherwise correctly recorded for this.
(ix) The total of discounts allowed of K45,200 from the cash book was not included in the
control account.
(x) Mwiinga received a refund of K39,000 for previously overpaying his suppliers. This has
not been included in the control account.
(xi) Credit balances in the payables ledger amounting to K28,550 had been included in the
payables list as though they were debit balances.
(xii) Cash received from a customer of K167,600 was not recorded in the receivables ledger.
(xiii) Sales returns amounting to K83,800 had been omitted from a personal customer
account.
Prior to the discovery of these errors, Mwiinga’s trainee accounting clerks obtained the
following details from the ledgers (balances before the above transactions):
‘K’
Receivables Control account balances b/f: Debit 1,873,200
Payables Control account balances b/f: Credit 1,728,300
List of Receivables balance (net) b/f Debit 1,700,400
List of payables balance (net) b/f Credit 1,785,200
Required:
Prepare the following corrected control and ledger accounts for Mwiinga:
(a) Corrected receivables ledger control balance account (5 marks)
(b) Corrected receivables ledger total balance (5 marks)
(c) Corrected payables ledger control account balance (5 marks)
(d) Corrected payables ledger total balance (5 marks)

Solutions
(a) Corrected receivables ledger control balance account
Balances before corrections (net) 1, 873,200 (Dr)
Adjustments:
Omitted sales invoices 600,000
Omitted irrecoverable debts (12,000)
Payables control contra (150,000)
Discounts allowed (45,200)
Corrected receivables ledger control balance (net) 2,266,000 Dr
(b) Corrected receivables ledger total balance
Total balances before corrections(net) 1,700,400 Dr
Adjustments:
Omitted sales invoices 600,000
Overstated customer balance (8,000)
Payment wrongly posted as receipt 225,000
Cash receipt omitted (167,600)
Omitted sales returns (83,800)
Corrected receivables ledger total balance 2,266,000
(c) Corrected payables ledger control account balance:
Balance before corrections (net) 1,728,300 (Cr)
Adjustments:
Discounts received wrongly posted as invoice (40,000)
Receivables contra (150,000)
Transposed invoice amount 21,600
Transposed invoice amount 9,000
Refund from suppliers 39,000
Corrected payables control account balance (net) 1,607,900

(d) Corrected payables ledger total balance

Total balance before corrections 1,785,200
Adjustments:
Discounts received wrongly posted as invoice (x2) (40,000)
Transposed invoice amounts 21,600
Transposed invoice amounts 9,000
Omitted payment to supplier (225,000)
Credit balance wrongly included as debit (28550 x 2) 57,100
Corrected payables ledger total balance 1,607,900