Debtors and Creditors Ledger Question

Q: Please prepare the debtors and creditors ledger control account for the following:


Balances:
Debtors (1/1/10) 150,000
Creditors (1/1/10) 45,000
Bad debt 2,200
Discount Received 2,500
Cash Received from debtors 115,000
Cheque Receipt from debtors 5,000
Set off 1,200
Discount Allowed 1,150
Credit Sales 25,000
Credit Purchases 12,000
Cash payment to creditors 18,000
Cheque payment to creditors 11,200
Understated Credit sales 1,500
Overstated cash receipt from debtors 2,000
Return Inward 1,300
Return Outwards 1,600
Overstated Cheque payment to creditors 1,000


A:
Here are the debtors and creditors control accounts:

debtors control account

creditors control account

All transactions have been assumed to have taken place in the month of January 2010.

For more information on debtors and creditors control accounts see my lesson on debtors and creditors control accounts.

Note that this question covers some advanced subjects such as returns (inwards and outwards) as well as bad debts. I don't cover these topics on my site. Only in my basic accounting books. Consider purchasing them if you need more info on these topics.

Hope you enjoyed the solutions here!

Best,
Michael Celender

For more exercises return to the Full Accounting Questions and Answers page.

Comments for Debtors and Creditors Ledger Question

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Control Account - Customer Cheques Refunded
by: Anonymous

When doing control accounts, where would you put "cheques refunded to customers" and on which side?

You can work this out by looking at the definitions of "debtors" and "creditors" and figuring out which one of these would be your customers.

"Debtors" are people that owe you. "Creditors" are people you owe.

So then customers would usually be debtors - people who owe you.

(FYI, creditors would usually be suppliers - people you buy things from on credit)

"Cheques refunded to customers" sounds weird. But for me it is most likely customers' cheques that the bank didn't recognize. In other words, bad cheques, which were then handed back to the customer.

This would mean the customer again owes what they originally owed. Meaning they owe more now. Meaning a debit (increase) to the debtors account (asset account - which increases on the debit/left side).

Hope that helps.

- Michael Celender
Founder of Accounting Basics for Students

Debtors Control Account - Discount Allowed & Refund
by: Sma

On which side of the debtors control account can I record the following transactions:

1) Discount allowed on dishonored cheques
2) Cash refund to customers


To figure this out just ask yourself whether each transaction should mean the debtor (person who owes you) will now owe more, or owe less.

If they will owe more, it's an increase to the debtors, which is a debit. For a decrease, it's a credit entry.

1) A discount allowed to the debtors means they owe less. I.e. a decrease to debtors. I.e. credit side.

2) Cash refund to customers means that we're giving them money back and cancelling a previous sale or order. Meaning they owe less than before since the original order was cancelled. So this would also be a decrease to debtors which is a credit.

- Michael Celender
Founder of Accounting Basics for Students

How are Off Sets Treated in Control Accounts?
by: Anonymous

How are off sets treated in control accounts?

My understanding is you're basically taking a balance from debtors and transferring this to creditors (or vice versa).

For example, the balance of debtors is a credit balance of $200 because of some strange refund that occurred. So you move this credit balance (which itself means its a liability) to the creditors account.

To do this you debit the debtors account by $200 to cancel it out there, and credit the creditors account, to show it there now.

That's an offset as far as I understand.

Hope that helps!

- Michael Celender
Founder of Accounting Basics for Students

control accounts
by: Anonymous

understated credit sales u record it on the debit side of the control accnt and overstatement of cash receipts is also on the debit side since the account will increase

Undercast and Overcast of Control Accounts
by: Anonymous

Hi, how do we treat an undercast and overcast in control accounts?

Depends on which account we're dealing with exactly.

Undercast means too little was previously transferred ("cast") to the account.

Overcast means too much was previously transferred ("cast") to the account.

To correct an undercast, increase the account - i.e. debit the debtors account or credit the creditors account.

To correct an overcast, decrease the account - i.e. credit the debtors account or debit the creditors account.

Pretty simple actually, right?

- Michael Celender
Founder of Accounting Basics for Students

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