Knowledge Check: Control Accounts and Reconciliations

In simple terms, a contra entry denotes:

• sales are made to, and purchases bought from, the same company.

• a customer returns some goods.

• a cheque payment is made to a supplier for exactly one invoice.

• an invoice has been incorrectly entered.

How would an irrecoverable debt be recorded in the general ledger, ignore sales tax?

• Dr Bank Cr Payables

• Dr Bank Cr Receivables

• Dr Receivables Cr Irrecoverable debt expense

• Dr Irrecoverable debt expense Cr Receivables

Which of the following statements is true? i. A contra will be a debit to the receivables ledger control account. ii. An irrecoverable debt will be a credit to the receivables ledger control account. iii. A discount received will be a credit to the receivables ledger control account. iv. A discount allowed will be a credit to the receivables ledger control account.

• All of them

• ii only

• ii and iv

When can VAT be recovered on an irrecoverable debt?

• As soon as the debt becomes irrecoverable.

• When the customer was due to pay.

• After six months have elapsed.

• When the bank says so.

If a contra is recorded in the Payables, what is the correct treatment of the opposite entry?

• Dr Payables

• Dr Receivables

• Cr Bank

• Cr Receivables

The Payables ledger control account shows a balance of £1,110,456 and the subsidiary ledger totals £1,110,856. Which of the following is likely to have caused the difference?

The balance on the sales ledger control account is currently £10,000. The following errors have been identified: (i) The sales day book was overcast by £200. (ii) Discounts allowed of £80 have only been accounted for in the subsidiary ledger. (iii) A credit note of £60 has been entered into the debit side of the individual receivables account. What is the balance on the sales ledger control account following these corrections?

• £9,800

• £9,720

• £9,660

• £9,600

Which of the following would lead to a difference between the sales ledger control account and the list of balances in the subsidiary ledger: i. Casting error in the sales day book. ii. Posting a sale to the wrong customer’s individual account. iii. Sale omitted from both the subsidiary ledger and sales day book. iv. Sales invoice omitted from subsidiary ledger. v. Casting error in the subsidiary ledger.

• Casting error in the sales day book.

• Posting a sale to the wrong customer’s individual account.

• Sale omitted from both the subsidiary ledger and sales day book.

• Sales invoice omitted from subsidiary ledger.

• Casting error in the subsidiary ledger.

Which of the following options is correct?

• All of the above

• (i), (ii), (iv), (v)

• (i), (iv), (v)

• (i), (iii), (iv), (v)

Arnie Lorenzo purchases goods for £204,600 (including VAT) and sells goods for £282,726 (including VAT). What amount of VAT is ultimately payable?

• £15,625

• £14,926

• £13,021

• £10,479