problem 1) The following totals were obtained from the books of a small business selling electrical goods:
Trade debtors at 1 April 2006 (debit balance) 273,176
Trade creditors at 1 April 2006 (credit balance) 100,277
Credit sales 395,477
Cash purchases 59,001
Credit purchases 194,226
Receipts from all customers 407,831
Credit sales return 2,660
Credit purchases returns 3,335
Cash discounts allowed to credit customers 3,552
- Cash discounts received from credit suppliers 1,008
Cash and cheques paid to trade creditors 155,910
Service fee charged to credit customers 1,200
Credit customers’ cheques dishonoured 7,229
Bad-debts written off 9,004
Provision for doubtful debts at 1 April 2006 5,464
Interest charged on overdue accounts of credit customers 2,774
Set-off of debit balances in the Sales Ledger with Credit
balances in the Purchases Ledger 5,893
Trade debtors at 30 April 2006 (credit balance) 5,000
(a) Create the Debtors Control Account and the Creditors Control Account for the month of April 2006.
(b) Briefly describe the reasons for preparing control accounts.
(c) Give reasons as to how a customer can have credit balance to his account.