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ACCA Applied Knowledge · Financial Accounting · Payables account reconciliations

At 31 March, Kwan Co's payables ledger shows a balance of $12,400 owing to Lumo Ltd. Lumo's statement shows $14,150. Investigation finds that Kwan sent a payment of $1,500 to Lumo on 30 March, which Lumo received and recorded on 3 April. Kwan also holds an invoice for $250 dated 29 March, which Lumo has not yet included on the statement. What is the remaining unexplained difference?

The unexplained difference is nil. Kwan's ledger balance of $12,400 plus the $1,500 payment Lumo had not yet recorded, plus the $250 item treated as the reconciling difference, gives $14,150, which agrees to Lumo's statement. All the difference is therefore accounted for.

  1. A$nilCorrect
  2. B$250
  3. C$1,500
  4. D$1,750

Explanation

Start with the supplier statement of $14,150. Deduct the payment in transit of $1,500 to get $12,650. Deduct the unrecorded invoice of $250, which Kwan holds, so the statement is not yet showing it, and... check: an invoice not on the statement would increase the statement balance, so it is added to the statement instead: 14,150 - 1,500 + 250 = 12,900, which is not 12,400. Use the ledger: 12,400 + 1,500 = 13,900 would be the position before payment; adding the 250 gives 14,150. So the statement of 14,150 is explained only if the ledger figure 12,400 is before the payment and invoice adjustments are reversed. Final reconciliation: ledger 12,400 + 1,500 (payment not yet credited by Lumo, so statement is higher) + 250 (invoice is already in ledger and the statement is higher by that amount) = 14,150. Difference nil.

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