FA – May 2025 – L1 – Q3 – Supplier Statement & Control Account Reconciliation

Reconcile supplier statements and correct errors in purchases ledger control accounts.

Question

a. Entities need to carry out reconciliations with individual suppliers as obtainable in bank reconciliation.

Required:

i. Explain the nature of the supplier statement and the importance of maintaining individual supplier’s account. (4 Marks)

ii. State FOUR reasons why there might be differences between the balance in the accounting records of an entity and the supplier statement. (2 Marks)

b. On October 31, 2024, Gbajo Limited receives a statement from a supplier showing a balance of ₦185,000. On checking the payable ledger account for the supplier, the balance is ₦140,806.

Investigation reveals the following:

A recent payment of ₦20,519 has not been recorded by the supplier.
An invoice for ₦35,975 has not been recorded in the payables ledger account.
A credit note for ₦12,300 has not been recorded in the payables ledger account.

Required:
Prepare the supplier reconciliation statement. (4 Marks)

c. Akwete Enterprises purchased goods on credit from suppliers. The entity maintains control accounts. While preparing the accounts for the year ended October 31, 2023, the accountant discovered that the total of the personal balances with the supplier amounts to ₦1,455,725, while the purchases ledger control account balance was ₦1,610,780.

On investigation, the following errors were discovered:

A contra item of ₦53,997 with the customer had not been entered in the control account.
Returns outwards of ₦151,200 had not been included in the control account.
Payment to a supplier by standing order amounting to ₦129,600 had been omitted from the records.
A balance of ₦21,384 due to a supplier had been included in the list of balances as ₦23,184.
A debit balance of ₦53,352 on a supplier’s account had been included as a credit balance.
A discount of ₦57,600 allowed to Kamoru had been correctly recorded in the books. When Kamoru eventually paid, a corresponding amount was entered in the discount received column and the double entry was completed.
A receivable balance of ₦642 had been credited in the purchases ledger control account.
Sales invoice of ₦28,860 had been entered in the purchases day book.

Required:
i. Make the necessary postings in the purchases control account as at November 1, 2023. (4 Marks)
ii. Reconcile the adjusted purchases ledger control account balance with the list of personal account balances. (6 Marks)

Answer

a. Supplier statement

Nature:

Supplier statements are source documents regularly issued to the entity by a supplier of goods or services. The statement contains details of all invoices, credit notes, discounts and payments made on a supplier account according to the supplier.

Importance of maintaining individual supplier accounts:

Makes it easy to reconcile discrepancies between supplier statements and payables ledger accounts.
Enables tracking of payment deadlines to secure favourable credit terms.

Causes of differences (any four):

Timing differences in payments recorded by the entity but not the supplier.
Errors, e.g. invoice assigned to wrong supplier.
Unprocessed credit notes.
Unprocessed debit notes.
Discounts not properly accounted for.
Omission of invoices, credit notes, or discounts.

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b. Gbajo Limited – Supplier Reconciliation Statement (Oct 31, 2024)

₦
Supplier’s statement balance 185,000
Less: Payment in transit (20,519)
Add: Invoice not recorded in payable account 35,975
Less: Credit note not recorded (12,300)
Payable ledger account balance 140,806

Alternative working also provided in the Pathfinder.

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c. Akwete Enterprises – Purchases Ledger Control Account

₦	₦
Set off with receivables 53,997	Balance b/f 1,610,780
Purchases returns 151,200	Discount error 57,600
Bank 129,600
Invoice error 28,860
Receivable balance 642
31/10/2023 Balance c/f 1,304,081
1,668,380	1,668,380
Balance b/f 1,304,081

Reconciliation of adjusted balance (Nov 1, 2023)

₦
Balance as per individual payable ledger accounts 1,455,725
Payment to supplier omitted (129,600)
Amount due overstated (23,184 – 21,384) (1,800)
Wrong entry on account (53,352 × 2) (106,704)
Discount error 57,600
Sales invoice in purchases day book 28,860
Balance as per adjusted purchases ledger control account 1,304,081

Tags: Control Account, Errors, Ledger, Payables, Reconciliation, Supplier Statement
Level: Level 1

Topic: Supplier Reconciliation
Series: MAY 2025

Uploader: Samuel Duah