Self-test Hitesh is a sole trader who prepares accounts to 30 September each year. He uses a manual double-entry book-keeping system and maintains sales ledger and purchase ledger control accounts. The balance on the purchase ledger control account at 30 September 2003 was £24,791 (credit). However, the list of balances which was extracted from the purchase ledger on that date showed totals of

£24,312 (credit balances) and £185 (debit balances).

On investigation, the following errors were found:

1. A batch of purchase invoices totalling £2,755 and received in early September 2003 had not been recorded in the books at all.

2. The credit side of a supplier’s account in the purchase ledger had been overcast by £100.

3. The debit side of the purchase ledger control account had been undercast by

£1,000.

4. A debit balance of £57 had been listed as a credit balance in the list of balances extracted from the purchase ledger.

5. A cheque to a supplier of £1,570 had been entered in the cashbook and supplier’s account as £1,750.

6. A discount of £231 received from a supplier had been entered on the wrong side of the supplier’s account in the purchase ledger.

7. Contras amounting to £340 had been recorded correctly in the individual supplier accounts in the purchase ledger but had not been recorded at all in the purchase ledger control account.

Hitesh is now thinking of switching to a computer-based accounting system and he hopes that this will eliminate errors such as those listed above.

Requirement for question

(a) State and briefly explain the principle of duality on which double-entry book-keeping systems are based.

(b) Prepare an amended purchase ledger control account and reconcile the balance on this account to the corrected total of the purchase ledger balances at 30 September 2003.

(c) If Hitesh transfers to a computer-based accounting system, will the types of errors that have occurred during the year to 30 September 2003 be eliminated?

If not, why not?

(d) Briefly explain the advantages and disadvantages of computer-based accounting systems.