Violetta is a trader. She maintains a full set of accounting records and prepares monthly control accounts.
a. State two advantages to Violetta of preparing a monthly sales ledger control account.
b. Explain the meaning of the word ‘contra’ in connection with control accounts and explain when such an entry is required.
Violetta provided the following information:
$
On 1 May 20–1:
Debit balances in sales ledger ………………………………………………………….. 3,020
Credit balances in sales ledger ………………………………………………………….. 35
Totals for the month of May 20–1:
Credit sales ………………………………………………………………………………………… 3,965
Cash sales ………………………………………………………………………………………….. 1,400
Receipts from credit customers …………………………………………………………… 2,695
Returns by credit customers ………………………………………………………………… 166
Returns to credit suppliers …………………………………………………………………… 205
Discount allowed ………………………………………………………………….. 55
Discount received ………………………………………………………………….. 79
Irrecoverable debts ………………………………………………………………….. 114
Provision for doubtful debts ……………………………………………………….. 120
Interest charged by credit supplier ………………………………………… 14
Interest charged to credit customer …………………………………………. 10
Contra entry ………………………………………………………………….. 15
On 31 May 20–1:
Debit balances in sales ledger ………………………………………………………………….. ?
Credit balances in sales ledger ………………………………………………………………….. 20
c. Select the relevant figures and prepare the sales ledger control account for May 20–1. Balance the account and bring down the balances on 1 June 20–1.
On 10 May Violetta had the following transactions:
1. Wrote off $95 owing by Wilma as irrecoverable.
2. Transferred the balance of $200 on Jim’s account in the sales ledger to his account in the purchases ledger.
d. Prepare journal entries to record these transactions. Narratives are required.
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