Exam code:4AC1
Trade payables ledger control account
Where do I find the information to complete a trade payables ledger control account?
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The books of original entry are used to find the totals
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The purchases day book is used to find the total value of credit purchases
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The purchases returns day book is used to find the total value of returned goods
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The cash book is used to find the total values for:
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Money paid to credit suppliers
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Money refunded by credit suppliers
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Cash discounts received from credit suppliers
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The journal is used to find the total values for:
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Interest charged by credit suppliers on overdue accounts
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Contra entries against the sales ledger
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Examiner Tips and Tricks
The ledger accounts are not used when preparing control accounts. The information is taken from the books of original entry.
Why might there be a debit balance in a trade payables ledger control account?
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A trade payables account will usually have a credit balance
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This indicates that the business owes the credit supplier money
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However, a trade payables account could have a debit balance
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This indicates that the credit supplier owes the business money
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Debit balances can occur when:
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The business pays credit suppliers in advance
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The business makes overpayments to credit suppliers
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The business is owed refunds from the credit suppliers
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The business has paid for goods and then returned them
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Debit and credit balances are totalled separately in the trade payables ledger control account
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This means there could be two opening balances and two closing balances
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What is the layout of a trade payables ledger control account?
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The layout looks very similar to the layout of a trade payables ledger account
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The main differences are:
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There could be two opening balances
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There could be two closing balances
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Use the name of the book of original entry as the detail
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Put more information in brackets
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Entries on the debit side: |
Entries on the credit side: |
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Examiner Tips and Tricks
Remember that cash purchases are not recorded in the payables ledger. Only enter cash paid to credit suppliers when the cash is used to make a payment towards an invoice.
Worked Example
Mika is a trader. He has provided the following information
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2023 |
$ |
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1 March |
Trade payables ledger control account credit balance |
17 150 |
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Trade payables ledger control account debit balance |
1 350 |
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2024 |
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29 February |
Totals for the year: |
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Credit purchases |
231 200 |
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Cash purchases |
5 000 |
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Bank payments to credit suppliers |
210 600 |
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Cash payments to credit suppliers |
1 500 |
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Returns to credit suppliers |
6 400 |
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Discount received |
3 200 |
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Contra entries |
2 100 |
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Interest charged by credit suppliers |
800 |
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Trade payables ledger control account credit balance |
? |
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Trade payables ledger control account debit balance |
450 |
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Prepare the trade payables ledger control account for the year ended 29 February 2024. Balance the account and bring down the balances on 1 March 2024.
Answer
Ignore the cash purchases, as they do not affect the payables ledger accounts.
Enter the balances and totals on the correct sides of the account.
Transactions which increase the amount the business owes appear on the credit side.
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Credit purchases
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Interest
Transactions which reduce the amount the business owes appear on the debit side.
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Payments to credit suppliers using cash or bank transfers
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Purchases returns
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Discount received
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Contra entries
At the end of the month, there is a $450 debit balance. On 1 March 2024, there will be a debit balance of $450; therefore, there will need to be a balance c/d on the credit side on 29 February 2024.
Mika
Trade Payables Ledger Control Account
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Date |
Details |
$ |
Date |
Details |
$ |
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2023 Mar 1 |
Balance b/d |
1 350 |
2023 Mar 1 |
Balance b/d |
17 150 |
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2024 Feb 29 |
Cash book (bank) |
210 600 |
2024 Feb 29 |
Purchases day book |
231 200 |
|
29 |
Cash book (cash) |
1 500 |
29 |
Journal (interest) |
800 |
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29 |
Purchases returns day book |
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