In a bit of a pickle

Hi folks,

Im currently revising for my final accounts prep exam (AQ2016) and using osborne books.

In the practise assessments in the back of the book, ive came across a question several times now (differing figures ofcourse) which im having great difficulty figuring out.

The questions follow this format:

The trader has a policy of allowing customers to settle their accounts X weeks after the sale is made. Which one of the following is most likely to be the total on the sales ledger at the end of the financial year?

I have no recollection of learning this when going through the book. Is it supposed to be just common sense?

Its making me anxious!! Im probably just being an idiot but i dont want to let this be an issue come friday during my exam so anyone with info on how to work through this scenario.

NOTE: THE FIGURES THEY USUALLY GIVE AS POSSIBLE ANSWERS IS THE FULL TRADE RECEIVABLES FIGURE FROM PREVIOUSLY IN THE TASK AND 2 MUCH LOWER FIGURES. I NEED TO KNOW HOW TO WORK OUT WHICH FIGURE IT IS.

Thanks!

Comments

  • N4TN4T Posts: 191AAT Student
    Hi,

    Without seeing the question with actual wording and figures I may have misunderstood the question. So I will take a guess.

    The sales ledger control account is a total of the sales ledger balances. Hence what I think the question is asking is at year end what is the trade receivables - how much is still owing from customers.

    You may be given sales of say £120,000 for the year. This will not be your answer because this implies none of the credit customers have paid during the year.

    Assume a figure for X weeks. Usually payment term is 30 days so I will assume customers are allowed to settle 4 weeks after sale.

    If no other information is given assume sales are spread evenly thoughout the year and therefore monthly sales of £10,000. So based on credit terms of 4 weeks, I expect trade receivable to be approx. £10,000 (in a perfect world)

    So you may have three options £120,000, £14,000 and £40,000. Using common sense I would select £14,000, as close to £10,000 as possible.

    I hope you can see the reasoning behind this, so yes the answer is based on common sense with the limited information you are given.

    On the other hand I may have approached this all wrong without seeing the actual question.
    chammy295
  • Adele69Adele69 CambridgePosts: 320AAT Student
  • chammy295chammy295 Posts: 4Registered
    Yes it is indeed like that question you linked.

    Thanks both for the replies... ill take this approach and see where it gets me. Its annoying when you pass costing with 97% and then something like this stumps you!!
  • chammy295chammy295 Posts: 4Registered
    Just for anyone else running into this issue, i had my exam on friday and passed and there was indeed a question regarding this in the exam.

    Ill give a rough gist of how i worked it out..

    The payment terms are 45 days. I divided 365 by 45 and got 8. I then divided the sales purchases ledger amount by 8 and got my answer.

    Basically the only variations will be the payment term length and the Purchases ledger control amount.
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