FA – L1 – Q15 – Control accounts and account reconciliations

Record Kweku's May transactions in receivables and payables control accounts using T accounts.

Question

The following are the transactions of Kweku, who commenced a new business on 1 May.

May

Transaction	Details
1	Started the business with capital of GH₵2,500,000, paid into a business bank account.
2	Bought goods on credit from the following entities: Elliot GH₵810,000; Martinez Traders GH₵1,305,000; Grayson GH₵375,000; Legacy GH₵1,140,000; Linden GH₵960,000. (Total: GH₵4,590,000).
3	Sold goods on credit to: Benson Retail for GH₵753,000, Quickmart for GH₵1,120,000 and Sanders for GH₵3,080,000. (Total: GH₵4,953,000).
4	Benson Retail paid by cheque GH₵723,000 taking a discount of GH₵30,000 for early payment. Benson Retail had not been expected to take the discount when the goods were originally sold to them.
5	Sanders paid GH₵1,500,000 by cheque.
6	GH₵700,000 was paid to Elliot.
7	The following payment was made to Grayson: GH₵350,000. A discount of GH₵25,000 was received for early payment.
8	Paid carriage outwards: GH₵345,000.
9	Purchase returns to Legacy GH₵400,000.
10	Sales returns from Sanders: GH₵270,000.
11	Purchases on credit from Martinez Traders GH₵753,000; Legacy GH₵1,650,000. (Total: GH₵2,403,000).
12	Sold goods on credit to Quickmart GH₵1,005,000.

Kweku maintains control accounts for receivables and payables in the main ledger, and accounts for individual customers and suppliers in a receivables ledger and a payables ledger respectively.

Required
(a) Use T accounts to show how the relevant transactions will be recorded in the receivables control account and the payables control account in the main ledger of Kweku in May. (You are not required to prepare T accounts for any of the other main ledger accounts.)

(b) Show the list of balances in the receivables ledger after recording the above transactions.

Answer

(A)

Payables control account

Date	Details	GH₵(000)	Date	Details	GH₵(000)
6 May	Bank	700	2 May	Purchases	4,590
7 May	Bank	350	11 May	Purchases	2,403
7 May	Discount received	25
9 May	Purchase returns	400
31 May	Balance c/d	5,518
Total		6,993	Total		6,993
			1 June	Balance b/d	5,518

Receivables control account

Date	Details	GH₵(000)	Date	Details	GH₵(000)
3 May	Sales	4,953	4 May	Bank	723
12 May	Sales	1,005	4 May	Discount allowed	30
			5 May	Bank	1,500
			10 May	Sales returns	270
			31 May	Balance c/d	3,435
Total		5,958	Total		5,958
1 June	Balance b/d	3,435

(B)

Receivables ledger balances at 31 May

Customer	GH₵(000)
Benson Retail (753 – 723 – 30)	0
Quickmart (1,120 + 1,005)	2,125
Sanders (3,080 – 1,500 – 270)	1,310
Total balances	3,435

Receivables control account balance: main ledger = 3,435

(C)

Payables ledger balances at 31 May

Supplier	GH₵(000)
Elliot (810 – 700)	110
Martinez Traders (1,305 + 753)	2,058
Grayson (375 – 350 – 25)	0
Legacy (1,140 + 1,650 – 400)	2,390
Linden	960
Total balances	5,518