CHAPTER 3 Practice Questions


Question 1 The Debtors Ledger Control Account of Argon Ltd showed the following balances, €35,000 Dr and €450 Cr, on 31/12/2008. These figures did not agree with the Schedule (List) of Debtors Balances extracted on the same date. An examination of the books revealed the following:


(i) Discount disallowed to a customer of €60 had been treated as a discount allowed in the discount account. (ii) Interest amounting to €150, charged to a customer’s overdue account, had been posted to the interest account as €100. Following a complaint by the customer, this was reduced to €80. This reduction had not been entered in the books.


(iii) Cash sales of €1,500 and credit sales of €560 had both been entered by Argon Ltd on the credit side of the customer’s account.


(iv) A credit note was sent to a customer amounting to €850. The only entry made in the books was €500 debited to the customer’s account.


(v) An invoice sent to a customer for €1,560 had been entered in the appropriate day book as €1,650. When posting to the ledger, no entry had been made in the customer’s account.


(vi) Argon Ltd accepted sales returns of €450 from a customer and entered this correctly in the books. The accounts clerk sent out a credit note showing a restocking charge of 10% of sales price but made the necessary adjustment only in the customer’s account. Later this charge was reduced to 4% but this reduction was not reflected in the accounts.


You are required to: (a) Prepare the adjusted Debtors Ledger Control Account. (b) Prepare the adjusted Schedule of Debtors showing the original balance.


Ask yourself: Does this increase or decrease the amount the debtor owes the business?


3


Question 2 The Debtors Ledger Control Account of Carn Ltd showed the following balances, €65,000 Dr and €200 Cr, on 31/12/2010. These figures did not agree with the Schedule (List) of Debtors Balances extracted on the same date. An examination of the books revealed the following:


(i) Cash sales €2,500 and credit sales €540 had both been entered by Carn Ltd in the credit side of the customer’s account.


(ii) Discount allowed of €120 had been entered correctly in the books; the discount was subsequently disallowed. The only entry made in relation to discount disallowed was to debit the discount account with €12.


(iii) Bills receivable for €590 had been entered in the debit side of a debtors account. (iv) An invoice sent to a customer for €1,600 had been entered in the appropriate day book as €1,400. When posting from this book to the ledger, no entry had been made in the customer’s account.


(v) A cheque for €500 received from a customer in full settlement of a debt of €600 had been entered correctly in the books. However, the cheque was dishonoured but no entry had been made in the books relating to the cancelled cheque.


(vi) A bad debt of €250 was omitted from the books. (vii) Carn Ltd accepted sales returns of €700 from a customer and entered this correctly in the books. However, a credit note was sent out by the secretary, showing a restocking charge of 10% of sales price. The secretary made the necessary adjustment only in the customer’s account. Later this charge was reduced to 5% but this reduction was not reflected in the accounts.


You are required to: (a) Prepare the adjusted Debtors Ledger Control account. (b) Prepare the adjusted Schedule of Debtors showing the original balance.


27


TIP


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