9706 · 1.4.4
Control accounts flashcards
Revision flashcards for Cambridge 9706 Control accounts (syllabus 1.4.4). Flip, recall, then mark a real past-paper question.
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Sales ledger control — debit items?
Credit sales, interest charged, dishonoured cheques.
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Sales ledger control — credit items?
Cash/bank receipts, credit notes, irrecoverable debts written off.
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Purchases ledger control — credit items?
Credit purchases, refunds from suppliers.
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Purchases ledger control — debit items?
Payments to suppliers, purchase returns.
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Why use controls?
Division of labour, fraud detection, locate errors in receivables/payables.
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Contra entry?
Customer also supplier — offset balances with journal entry.
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What is the accounting entry for a contra or set-off in the control accounts?
Debit the Purchases Ledger Control Account and Credit the Sales Ledger Control Account with the amount of the set-off.
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Why are cash sales and cash purchases excluded from the main control accounts?
Control accounts are designed to monitor credit transactions and manage trade receivables and payables. Cash transactions do not create a debtor or creditor and are recorded directly in the cash book.
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A cheque from a customer is dishonoured by the bank. What is the entry in the Sales Ledger Control Account?
A debit entry. This reverses the original receipt, increasing the customer's debt back to its original amount before the payment was attempted.
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What does a debit balance on a Purchases Ledger Control Account signify?
It indicates the business has overpaid a supplier, made a payment in advance, or has a credit note (e.g., for returns) that is larger than the amount owed. It is an asset (a current asset).
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What are the primary source documents for the main totals posted to control accounts?
Sales Day Book (for credit sales), Purchases Day Book (for credit purchases), Sales Returns Day Book, Purchases Returns Day Book, and the totals of the bank/discount columns in the Cash Book.
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What is a 'schedule of balances'?
A list of all the individual balances from a subsidiary ledger (e.g., sales ledger or purchases ledger). The total of this schedule should equal the closing balance of the corresponding control account.
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How are irrecoverable debts (bad debts) recorded in the Sales Ledger Control Account?
As a credit entry. This reduces the total amount owed by trade receivables, as the debt is no longer expected to be collected.
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What are the two main sources of error when a control account and its subsidiary ledger do not agree?
1. Errors in the control account itself (e.g., incorrect totals from books of prime entry). 2. Errors in the subsidiary ledger (e.g., an invoice posted to the wrong customer account, or omitted entirely).
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What does a credit balance on a Sales Ledger Control Account signify?
It means a customer has overpaid, paid in advance, or has a credit note that exceeds their outstanding balance. It represents a liability (amount owed to the customer) and should be reported as such.