Question

SECTION A - Theory of Financial Accounting.

(A). Identify three books of account from which entries are made into control accounts. (3 marks)
(B). State two uses of control accounts. (4 marks)
(C). List four items each that would be recorded on the debit side of: (i) purchases ledger control account; (ii) sales ledger control account. (8 marks)

Accepted Answer

(A) A control account is a memorandum account whose balance reflects the aggregate balances of many related subsidiary accounts that are part of the double entry system. Books of account from which entries are made into control accounts include:
1. Returns outward day book / purchases returns journal
2. Returns inward day book / sales journal
3. Sales day book / sales journal
4. Purchases day book / purchases journal
5. Cash book
6. General journal / journal proper

(B) Uses of a control account:
1. It helps in locating errors.
2. It provides a check on the accuracy of balances in the ledgers.
3. It makes fraud more difficult.
4. The balances of total debtors and creditors can easily be calculated without going through every individual account.

(C)(i) Items recorded on the debit side of the Purchases Ledger Control Account (transactions that reduce the debt owed to suppliers):
1. Cheque/payments to suppliers
2. Returns outwards
3. Discounts received
4. Contra entry/set-off

(C)(ii) Items recorded on the debit side of the Sales Ledger Control Account (transactions that increase the debt owed by customers):
1. Credit sales
2. Debit notes issued
3. Interest charged on an overdue account
4. Dishonoured cheques

GCE Accounting 2022 Theory — Question 1

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