MC is a trader who keeps a complete set of accounting records and, at the end of each month, prepares control accounts.
MC has supplied the following details for July 2022.
On 1 July 2022:
Purchases ledger control account credit balance b/d $21400
Purchases ledger control account debit balance b/d $130
Monthly totals:
Credit purchases $259600
Credit purchases returns $9800
Cash purchases $240
Cheques paid to credit suppliers $228200
Discount received $12900
Cash paid to credit suppliers $500
Interest charges by credit suppliers $150
Contra sales ledger $2260
At 31 July 2022 the purchases ledger control account showed a credit balance c/d of $180.
(a)[4]
Complete the table by giving the book of prime entry that MC would consult for the information used when preparing control accounts.
(b)[2]
Explain the way in which a contra entry is recorded in the ledger accounts.
(c)[9]
Prepare the purchases ledger control account for July 2022. Balance the account and carry the balances down on 1 August 2022.
(d)[5]
Advise MC whether he ought to change to the new overseas supplier, and justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The book of prime entry for discount received from credit suppliers is the Cash book.” …