Question

On May 1, 2017 you had the following items in your business:

Stock, $14,500,000; Motor vehicles, $15,000,000; Creditors/Accounts payable- J. Downey $1,500,000, P. Wright $2,000,000; Cash in hand, $300,000; Pre-paid insurance, $80,000; Bank loan, $4,000,000; Furniture & fittings, $3,600,000; Accrued rent, $100,000; Cash at Bank, $12,000,000; Debtors/Accounts receivable-A. Howard $3,000,000, S. Simpson $2,800,000; K. Kirk $350,000.
During May 2017 the following business were transacted:

May 1- Bought goods on credit from B. Burke $4,500,000.
3- Paid rent with cheque $150,000.
5- Sold goods on credit to A. Harvey, $5,600,000.
7- Cash sales, $400,000.
10- Paid electricity bill $130,000 cash.
12- Paid J. Downey $1,000,000 by cheque.
15- Sold goods on credit to S.Simpson, $7,000,000.
15- Paid P. Wright $1,500,000 by cheque.
18- S.Simpson paid $3,500,000 by cheque.
19- Bought goods on credit from F. Smith, $2,400,000.
22- Sold goods for cash to T. Royal, $1,800,000.
24- Returned damaged goods valued at $300,000 to B.Burke.   
25- Paid wages by cheque, $3,000,000.
27- Paid insurance $70,000 cash.
28- Paid $50,000 for transportation charge for goods bought from F. Daley.
28- Received a cheque for $2,200,000 from A. Howard.
29- Sold goods on credit to V. James, $6,200,000.
29- Miscellaneous expenses paid with cheque, $1,250,000.
29- Bought goods for cash from C. Croft for $350,000.
30- Banked $1,000,000.
30- A. Harvey returned incorrect goods delivered to him valued at $200,000.
30- The balance on K. Kirk’s account was written off as irrecoverable.
30- Received $300,000 cash as commission for selling goods for D. Riley.
  

Compute the following :

A) The Sales Ledger Control Account.

B) The Purchases Ledger Control Account.

Answer 1

	Purchase Ledger control Account
Dr				Cr
Date	Details	$	Date	Details	$
May-01	Balance b/d	0
May-01	Creditors/Accounts payable- B.Burke A/C	4500000	May-24	Creditors/Accounts payable- B.Burke A/C	300000
	(refer working notes -1(i)			(refer working notes -1(vii)
May-19	Creditors/Accounts payable- F. Smith A/C	2400000
	(refer working notes -1(v)
May-29	Creditors/Accounts payable- C. Croft A/C	350000	May-31	Balance c/d	6950000
	(refer working notes -1(ix)			(Debit -credit )
	Total	7250000			7250000
Jun-01	Balance b/d	6950000

Note : we assume opening balance of purchase ledger control account is NIL as not mentioned in question

Sales Ledger control Account
Dr				Cr
Date	Details	$	Date	Details	$
May-30	Debtors/Accounts receivable- A. Harvey A/C	200000	May-01	Balance b/d	0
	(refer working notes -1(x)		May-05	Debtors/Accounts receivable- A. Harvey A/C	5600000
				(refer working notes -1(ii)
			May-07	Cash A/C	400000
				(refer working notes -1(iii)
May-31	Balance c/d	20800000	May-15	Debtors/Accounts receivable- S.Simpson A/C	7000000
				(refer working notes -1(iv)
			May-22	Cash A/C	1800000
				(refer working notes -1(vi)
			May-29	Debtors/Accounts receivable- V. James A/C	6200000
				(refer working notes -1(viii)
	Total	21000000			21000000
			Jun-01	Balance b/d	20800000

Note : we assume opening balance of Sales ledger control account is NIL as not mentioned in question

Working Note :

We have to make the journal of the all transactions before preparing purchase and sales control ledger account

1.

i) May 1 Bought goods on credit from B. Burke $4,500,000

Purchase Ledger control A/C   Dr.  $4,500,000

Creditors/Accounts payable- B.Burke A/C Cr.    $4,500,000

ii) May 5 Sold goods on credit to A. Harvey, $5,600,000.

Debtors/Accounts receivable- A. Harvey A/C Dr. $5,600,000.

Sales Ledger control A/C Cr... $5,600,000.

iii) May 7 Cash sales, $400,000.

Cash A/C Dr......$400,000.

Sales Ledger control A/C Cr. $400,000.

iv) May 15- Sold goods on credit to S.Simpson, $7,000,000.

Debtors/Accounts receivable- S.Simpson A/C Dr. $7,000,000.

Sales Ledger control A/C Cr. $7,000,000.

v) May 19- Bought goods on credit from F. Smith, $2,400,000.

Purchase Ledger control A/C Dr. $2,400,000.

Creditors/Accounts payable- F. Smith A/C Cr $2,400,000.

vi) May 22- Sold goods for cash to T. Royal, $1,800,000.

Cash A/C Dr. $1,800,000.

Sales Ledger control A/C Cr. $1,800,000

vii) May 24- Returned damaged goods valued at $300,000 to B.Burke.

Creditors/Accounts payable- B.Burke A/C Dr. $300,000

Purchase Ledger control A/C Cr   $300,000

viii) May 29- Sold goods on credit to V. James, $6,200,000.

Debtors/Accounts receivable- V. James A/C Dr. $6,200,000.

Sales Ledger control A/C Cr.   $6,200,000.

ix) May 29- Bought goods for cash from C. Croft for $350,000.

Purchase Ledger control A/C Dr. $350,000.

Creditors/Accounts payable- C. Croft A/C $350,000.

x) May 30- A. Harvey returned incorrect goods delivered to him valued at $200,000.

Sales Ledger control A/C Dr. $200,000.

Debtors/Accounts receivable- A. Harvey A/C Cr. $200,000.

2. Following transactions are non purchase/sales transactions hence these will not consider in purchase and sales control account.  

May 1 Paid rent with cheque $150,000.- Paid electricity bill $130,000 cash.
12- Paid J. Downey $1,000,000 by cheque.
15- Paid P. Wright $1,500,000 by cheque.
18- S.Simpson paid $3,500,000 by cheque.
25- Paid wages by cheque, $3,000,000.
27- Paid insurance $70,000 cash.
28- Paid $50,000 for transportation charge for goods bought from F. Daley.
28- Received a cheque for $2,200,000 from A. Howard.
29- Miscellaneous expenses paid with cheque, $1,250,000.
30- Banked $1,000,000.
30- The balance on K. Kirk’s account was written off as irrecoverable.
30- Received $300,000 cash as commission for selling goods for D. Riley.