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help on control account reconciliation

dziumbrauskaitedziumbrauskaite Feels At HomeRegistered Posts: 42
hey guys,

Im busy and very very tired mum, as my son doesnt let me sleep...and its very difficult for me to study, but I thought Im doing quite well until I got to the chapter ledger balances and control accounts...:( I cant understand, how to reconcile the control account errors...eg.an invoice for £180 was recorded correctly in teh SDB but was posted to the debtor's individual account as £810... Maybe someone can explain, what to do and why.. I can say, that I understand credit debit rules, but...

Comments

  • SharleenSharleen Feels At Home Registered Posts: 36
    Hi there

    I recently did that chapter too. When they give you the list of errors the first thing you need to do is work out whether the error affects the main control account or the subledger account.

    As you said, this one was only entered incorrectly on the sub ledger so that's what you need to adjust. As it was entered as a higher amount then the total of the sub ledger accounts will be too high. You need to deduct the difference (810-180) from the total of the sub ledger accounts to correct that error. If that is the only error the sub ledger and main ledger should then agree.

    If you have things like the day book being incorrectly totalled then you need to make the change to the main ledger instead as the day book totals only get entered into the main ledger.

    Does that help at all or just make it worse!?
  • sharonjsharonj Well-Known Registered Posts: 166
    hey guys,

    Im busy and very very tired mum, as my son doesnt let me sleep...and its very difficult for me to study, but I thought Im doing quite well until I got to the chapter ledger balances and control accounts...:( I cant understand, how to reconcile the control account errors...eg.an invoice for £180 was recorded correctly in teh SDB but was posted to the debtor's individual account as £810... Maybe someone can explain, what to do and why.. I can say, that I understand credit debit rules, but...

    Hi

    I'm doing intermediate at the mo but did have trouble with this when I studied it. What you have to remember is that the control accounts give a total of all entries that have gone through the account that it controls so for the subsidiary sales ledger control account you would be able to see a total of sales to all debtors in a given period, a total of discount allowed and a total of amounts that debtors owe and any money received in bank/cash for debtors accounts to clear or reduce their balances.

    If the question states that the sdb was correct but the individual debtors account in the subsidiary sales ledger is incorrect then you would need to pass a journal entry rectifying the entry within the control account and this would then also be passed down to the subsidiary sales ledger account. Make sure to quote the account within the subsidiary sales ledger that needs to be corrected too within the narative that you quote at the bottom of the journal entry underneath the amounts and accounts to be debited and credited.

    Hope this makes sense, if you are using the Osborne books there is a big chapter on the journal and correction of errors that should be able to make this seem a bit easier.


    The way to rectify the entry that you have quoted would be to credit the sales ledger control account with £810 to correct the error and debit the sales ledger control account with £180 which is what should have happened initially. The narative at the bottom would state....

    debit debtor(name of debtor)180
    credit debtor(name of debtor)810

    Usually when passing a journal entry you would put the account and entry to be debited first and then the account to be credited. This is a little confusing as it is the same account to be debited and credited but it tidys up the account and means the account now shows a true balance of the debtors.
  • dziumbrauskaitedziumbrauskaite Feels At Home Registered Posts: 42
    thank you so much for yor answers, it helped me a bit, but I'm still very confused... and more I work with the past papers, more I get confused.. looks like I don't know anything... maybe it's just the exam panic as I'm sitting my exam in December..so,not much time left and so much to take in, understand and practice...
    and maybe it will sound very simple to you guys, but how I need to adjust PLCA when eg. an undercast of £20 in the total column of the purchase day book. should I credit or debit PLCA?
  • donnas1977donnas1977 Well-Known Registered Posts: 182
    Hi

    I was doing that last week in class and i struggled alot with this too. For the undercast cash payments book you would DR the PLCA

    Donna
  • dziumbrauskaitedziumbrauskaite Feels At Home Registered Posts: 42
    oh, looks like, that I'm not alone :) Thanks for your answer Donna!
    so, that means for the overcast I need to credit PLCA?
    and will you sit your exam in December?
  • sharonjsharonj Well-Known Registered Posts: 166
    thank you so much for yor answers, it helped me a bit, but I'm still very confused... and more I work with the past papers, more I get confused.. looks like I don't know anything... maybe it's just the exam panic as I'm sitting my exam in December..so,not much time left and so much to take in, understand and practice...
    and maybe it will sound very simple to you guys, but how I need to adjust PLCA when eg. an undercast of £20 in the total column of the purchase day book. should I credit or debit PLCA?

    The thing to remember when trying to rectify an undercast or an overcast of an account is whether the account usually has a debit or credit balance. The sales account would have a credit balance. The purchases account would have a debit balance. Expenses accounts would have a debit balance and assets would also be a debit balance. Liabilities would be a credit balance. To rectify an overcast of an expense account you would need to credit it with the overcast amount, to debit it would only increase the amount overcast. Hope this makes sense.
  • dziumbrauskaitedziumbrauskaite Feels At Home Registered Posts: 42
    thank you Sharon for your answer! oh, yes it makes sense a lot. I see, that step by step , but I'm getting there :) and thanks to your answers guys! Its so good, that there are so many helpful people!
  • dobbieobbydobbieobby Well-Known Registered Posts: 231
    BTW, it's impossible to post a journal on ANY computer system which does not balance each side, so the above journal would be incorrect in the accountancy world.
    Think of journals as an old set of scales.
    What you put on one side must match the other side so the scales are in the middle and balance.
  • sharonjsharonj Well-Known Registered Posts: 166
    I know that you have to balance both sides, I gave the answer that you would have to post to the sales ledger control account alone. To balance the journal you would have had an amount outstanding showing at trial balance. The amount outstanding at trial balance would have been credited to the suspense account. The difference between the correct entry and incorrect entry is £630 and that would be credited to suspense. To rectify the entry you would have to pass the following entries as a journal. This is all asuming that it is only the debit entry to the slca that is incorrect and that the credit to the sales account and vat account were correct.

    entry outstanding on the suspense account would be cr suspense 630. To clear this amount off suspense you would need to pass the following journal.
    dr suspense 810
    cr slca 810
    dr slca 180
    cr suspense 180.

    Hope this clarifys the point made in the previous post to show that the scales balance to rectify this journal entry.
  • dobbieobbydobbieobby Well-Known Registered Posts: 231
    Sorry Sharon, I wasn't being perdantic!
    I'm two exams off finishing AAT, I just remember back to when I started and not getting the most simple things like T accounts. Now, it just comes naturally, but my mate explained it with using scales as an example and it stuck, I thought I'd pass down my 'knowledge'!!!
  • sharonjsharonj Well-Known Registered Posts: 166
    dobbieobby wrote: »
    Sorry Sharon, I wasn't being perdantic!
    I'm two exams off finishing AAT, I just remember back to when I started and not getting the most simple things like T accounts. Now, it just comes naturally, but my mate explained it with using scales as an example and it stuck, I thought I'd pass down my 'knowledge'!!!

    That's no problem. I think the scales way of explaining it is a good idea. I was just trying to simplify the entry passed to the slca.
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