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ACCA Applied Knowledge · Financial Accounting · Double-entry bookkeeping principles including the maintenance of accounting records

Orchid Ltd's receivables ledger control account has opening balance $20,000 debit. During the period: credit sales $85,000; cash received from customers $78,000; discounts allowed $1,500; sales returns $2,500; irrecoverable debts written off $1,000. A customer's cheque for $800 was dishonoured and is to be reinstated as a receivable. What is the closing balance of the control account?

The closing balance is $22,800 debit. Opening $20,000 plus credit sales $85,000 and the dishonoured cheque $800 is $105,800. Deducting receipts $78,000, discounts $1,500, returns $2,500 and write-offs $1,000 leaves $22,800, because a dishonoured cheque increases receivables.

  1. A$22,800Correct
  2. B$22,000
  3. C$23,600
  4. D$21,200

Explanation

Start 20,000 + sales 85,000 + dishonoured cheque 800 = 105,800. Deduct cash 78,000, discounts 1,500, returns 2,500 and write-offs 1,000 = 83,000. Balance is 22,800. Omitting the dishonoured cheque gives 22,000; deducting it gives 21,200.

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