The opening balances on 1 January in the books of Weatherstone Ltd included the following:

Purchase Ledger Control Account

315,907

Sales Ledger Control Account

602,135

During the year to 31 December, the following transactions took place:

Credit Sales

2,401,200

Cash Sales

972,000

Credit Purchases

1,907,000

Cash Purchases

44,600

Amounts received from Debtors

2,506,200

Amounts paid to Creditors

1,296,500

Returns to Creditors

5,875

Returns by Debtors

14,961

Discounts Allowed

4,480

Discounts Received

3,400

Required:

a)

Write up the Sales Ledger Control account and the Purchase Ledger Control account for the

year. Balance off the two accounts at the year end.

(12 marks)

b)

After the accounts had been prepared, it was discovered that the Purchase ledger control

account did not reconcile with the total of the individual balances in the Purchase ledger which

was 902,000. The following errors in the control account were subsequently found. Make the

necessary amendments to the control account to reconcile with the above balance.

i)

Goods purchased for 9,000 had been returned to the supplier. The supplier account

had been correctly updated, but no posting has been made to the control account.

ii)

The purchases daybook had been under cast by 8,400.

iii)

A contra entry had been agreed with a supplier who is also a customer to write off

14,600. The contra has not yet been entered in the control accounts. (

Do not make the

sales ledger control adjustment).

iv)

A supplier was overpaid by 68 and has since ceased trading - the debt needs to be

written off.

(6 marks)

c)

Explain, in your own words, the function of the control accounts and the advantages and

disadvantages they give to the owners of a business.