O-LevelAccountingVerification of accounting records7707/22 · May/June 2017 · Q220 Marks

Umar sells goods on credit and maintains a sales ledger control account. The following information is available for the month ended 31 March 2017. 2017 $ March 1 Amount owing by credit customers 36000 31 Cheques from credit customers 53800 Dishonoured cheque (included in cheques received) 2080 Cash sales 4500 Credit sales 51270 Credit notes issued to customers 1750 Discount allowed 950 Bad debt 1450 REQUIRED

(a)State two benefits of using control accounts.[2]
(b)Prepare the sales ledger control account for March 2017. Balance the account and bring down the balance on 1 April 2017.[9]
(c)Prepare the provision for doubtful debts account for the year ended 31 March 2017. Balance the account and bring down the balance on 1 April 2017.[4]
(d)Name one accounting concept or principle that supports the use of a provision for doubtful debts.[1]
(e)Prepare the journal entry made by Umar to record the bankruptcy of Horner. A narrative is required.[4]

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

[1] Provides total of debtors and creditors
[1] Assists the location of errors / identifies errors
[1] Checks arithmetical accuracy
[1] A deterrent against fraud
[1] Checks the efficiency of staff
[1] Calculates sales and purchases
[1] March 1 Balance b/d 36000
[1] Sales 51270
[1] March 31 Bank 2080
[1] March 31 Bank 53800
[1] Sales returns 1750
[1] Discount allowed 950
[1] Bad debt 1450
[1] Balance c/d 31400
[1] April 1 Balance b/d 31400
[1] April 1 Balance b/d 1900
[1] March 31 Income statement 330
[1] Balance c/d 1570
[1] April 1 Balance b/d 1570
[1] Prudence
[1] Accruals (matching)
[1] Bad debts 750
[1] Bank 500
[1] Horner 1250
[1] Narrative: Horner declared bankrupt, received $500, in full settlement of $1 250 debt

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