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The purchase ledger account of a supplier shows...

My osborne book has this question:

The purchase ledger account of a supplier shows a purchase invoice which is not shown on the supplier's statement of account. (There are then 3 options)

1. Can be adjusted by asking the supplier to issue a credit note
2. Will reduce the total amount shown as owing on the statement of account.
3. Will increase the total amount shown on the statement of account.

The book says that number 2 is the answer. Can someone explain this to me please, as I am a bit confused?

Thanks

Comments

  • shamil91shamil91 Registered Posts: 94
    Hi there,

    This is my opinion on how they would have got the answer. The purchase ledger on an account shows an invoice which isnt shown on the statement of account of the supplier this could be due to a typing error entering an invoice not associated with the supplier (maybe working on a few suppliers together). This means that the Purchase ledger account will have a greater or (higher) total that the statement of account hence why it wont reconcile and balance. So you are given 3 options, it cant be option one because you cant adjust that by asking the supplier to issue you a credit note because the statement of account is from the supplier so they would have a greater idea of the goods they would have sold to the company as they have to record each item sold, Its like a bank statement vs a bank account statement of the company software we cant accuse the bank of being wrong (can happen them being wrong but its rare). You then have number 2 which says reduce the total amount shown as owing on the statement of account is correct because we would need to adjust the purchase ledger account (reduce) because of an extra invoice in order to match balanace and reconcile with the Statement of account. Number 3 is wrong because we would not increase the total amount on the statement of account because its techincally not your responsibilility as it has been sent by the supplier. You would need to raise a query with the supplier to ensure that the total is correct on the statement of account and not missing any invoices otherwise it would be a mistake made by the accounts person entering the invoices for the purchasing company.

    Hope this helps

    Kind regards

    Shamil Karia
    shaunpoll
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