RECONCILING DEBTORS LISTS AND CREDITORS LISTS WITH CONTROL

ACCOUNTS:
Businesses that buy and sell on credit keep a Debtors/Creditors Ledger which contains the individual accounts of
each debtor/creditor. A record of all transactions of the debtor is shown in the Debtors Ledger. The Debtors Ledger
contains the opening balance, invoices issued to him for stock sold to him, returns, allowances, payments made by
him, and discounts allowed to him. The Creditors Ledger contains the opening balance, invoices issued by the
creditor for purchases made, returns, allowances, payments made to the creditor, discounts received.

A copy of this account is sent to the debtor at the end of the month. These accounts are presented in ‘three-column’
format instead of the conventional ‘T-form’ account as this is generally easier for the debtor to read and understand.

A Debtors List/Creditors List is prepared at the end of each month. The list serves as a summary of all the
debtors/creditors and the balances owing. The total of the Debtors/Creditors List must agree with the balance on the
Debtors/Creditors control accounts. Control accounts are drawn up from totals obtained from the relevant subsidiary
journals. Should the owner of a business need to know what an individual debtor owes him, he would look at the
Debtors Ledger. If he needs to know what the total amount owing by all his debtors, he will look at the Debtors
control account. The control accounts are summaries of all the individual accounts in the subsidiary ledgers (Debtors
and Creditors Ledgers).

For control purposes the control accounts should always be in balance with the Debtors and Creditors List. In many
instances they are not in balance. The personnel responsible will have to investigate the reasons. There could, for
example, be errors in posting, wrong amounts entered when posting or there could be transactions that had not been
processed. The error/omission may impact on the relevant control account, the list or both the control account and
the list.

CREDITORS’ RECONCILIATION
STEPS:
1.  and
2. Record “THEIR” in “OUR” books,
3. Record “OUR” in “THEIR” books US and THEM
4. Be a lert for the “double entry”
Compare “US” and “THEM” (must be the same!!!)

US and US
“double entry”
1. correct account
2. correct amount
3. wrong side
CREDITORS- and DEBTORS RECONCILIATIONS
TAKE NOTE:
1. Decide where is the error “CL/DL” or “Control account”
2. Decide if error will + or - debts
3. If document  and journal  should ledger 
4. If journal totals X ONLY contol account will be X
5. If induvidual creditor/debtor X fix ONLY CL/DL 
6. Be a lert for the “double entry
AGE ANALYSIS

As part of internal control, it is necessary that the bookkeeper / accountant draws up an age analysis of their debtors
and creditors on a regular basis, e.g. normally on a monthly basis. The purpose of the Age Analysis is to be able
to determine at a glance, whether the debtors are paying their accounts in the stipulated period or are taking
longer periods to pay.

Example:
AGE ANALYSIS IN THE BOOKS OF B. BUSH AND SONS AS AT 30 JUNE 20.8
Debtor Credit Present Current 30 days 60 days 90 days 120 days
limit balance
A. Smith R10 000 R6 400 R2 200 R4 200
B. Nehr R8 000 R9 000 R3 600 R1 200 R4 200
C. Car R12 000 R11 000 R440 R2 300 R5 600 R2 100 R560
TOTAL R25 400 R6 240 R7 700 R8 800 R2 100 R560

% 100% 24,6% 30,3% 34,6% 8,3% 2,2%

Explanation of the Age Analysis:

The total amount that the debtor is allowed to spend on his account. The amount would
Credit limit have been determined by B. Bush based on earnings of the debtor, previous records, etc.
The debtors should never owe us more than this amount at any point in time.
Present The debit balance on the individual debtors account as at 30 June 20.8. The total of this
balance column must agree with the balance on the Debtors control account on 30 June 20.8.
The amount that the debtors have bought on account during the current month, i.e. June
Current
and have still not paid back.
The amount that the debtors still owe for goods sold to them on account last month, i.e.
30 days
May 20.8.
The amount that the debtors still owe for goods sold to them on account 2 months ago, i.e.
60 days
April 20.8.
The amount that the debtors still owe for goods sold to them on account 3 months ago, i.e.
90 days
March 20.8.
The amount that the debtors still owe for goods sold to them on account 4 months or more
120 days
ago, i.e. February 20.8 and earlier.

Comment on Age Analysis:

• It would be essential to know what credit terms debtors are allowed by B. Bush prior to making any comments.
Generally most businesses grant their debtors 30 days to pay their accounts. This means that goods will be sold
throughout the month of June 20.8, a statement will be produced at the end of June showing details of the account
and the debtor will then be given 30 days to pay – in this case by the end of July 20.8. Depending on when the
debtor actually purchased in June, this may well mean that the debtor actually has more than 30 days, e.g. if he
bought on 10 June he would have until 31 July to pay.
• This is assuming that we are working on the statement basis and not the invoice basis, which would be the method
followed at school, i.e. 30 days from the date of statement.
• We do not work on individual days, but take 30 days as meaning the following month. In other words, do not start
calculating that February has 28 or 29 days, March 31 and April 30 days. 30 days is a calendar month later. 60
days will therefore be 2 calendar months later.
• The Age Analysis is therefore a historical document – drawn up to show what the debtors owe for purchases in the
past.
• Based on this information if we now study the Age Analysis you will note that all amounts from 60 days and later will
be overdue. It will therefore be these amounts on which interest on overdue accounts would be charged.
• If no payments are made during July then all these figures will move up a column, i.e. current will become 30 days, 30
days will become 60 days, etc.
• Likewise, at school we work on the assumption that payments are made against the oldest balance first, i.e. if C.
Car made a payment of R2 000, R560 will come off the balance in the 120 days and R1 440 off the 90 days
balance.

QUESTION 1

Woodies Fashion sells ladies’ clothes. Helen Nkosi is a regular client of Woodies Modes.

- The date is 15 June. Prepare an age analysis for the account of Helen Nkosi.

INFORMATION
WOODIES FASHION DEBTORS’ STATEMENT

Helen Nkosi
P.O. BOX 345
Pinetown 3600 Date of statement: 25 March 20.8
DEBIT CREDIT Balance
28-Feb Balance R1 500.00
07-March Invoice 7058 R5 100.00 R6 600.00
08-March Credit note 4078 R240.00 R6 360.00
11-March Receipt 1006 R1 425.00 R4 935.00
11-March Discount R75.00 R4 860.00
22-March Invoice 8211 R3 200.00 R8 060.00
25-March Receipt 1765 R2 000.00 R6 060.00
25-March Discount R100.00 R5 960.00

WOODIES MODES DEBTOR’S STATEMENT

Helen Nkosi
P.O. BOX 345
Pinetown 3600 Date of statement: 25 April 20.8
DEBIT CREDIT Balance
26-March Balance R5 960.00
27-March EFT reversed - error R2 000.00 R7 960.00
27-March Discount reversed - error R100.00 R8 060.00
27-March Invoice 8792 R3 000.00 R11 060.00
05-Apr Receipt 1936 R1 200.00 R9 860.00
15-Apr Invoice 9100 R4 400.00 R14 260.00
17-Apr Credit note 4903 R380.00 R13 880.00
25-Apr Receipt 2188 R1 300.00 R12 580.00

WOODIES MODES DEBTOR’S STATEMENT

Helen Nkosi
P.O. BOX 345
Pinetown 3600 Date of statement: 25 May 20.8
DEBIT CREDIT Balance
26-Apr Balance R12 580.00
01-May Invoice 9226 R850.00 R13 430.00
10-May Credit note 4996 R170.00 R13 260.00
 15-May Receipt 2430 R600.00 R12 660.00
20-May Receipt 2650 R1 000.00 R11 660.00
22-May EFT reversed - error R1 000.00 R12 660.00
24-May Invoice 9340 R1 100.00 R13 760.00

AGE ANALYSIS

60 days 30 days Current Total

7 960 4 020 1 780 13 760

MARCH APRIL MAY

Movements Balance Movements Balance Movements Balance
1 500 B 1 500 4 400 inv 4 400 850 inv 850
5 100 inv 6 600 (380) C/N 4 020 (170) C/N 680
(240) C/N 6 360 (4 020) pd 0 1 100 inv 1 780
(1 425) pd 4 935 (1 020) pd 760
(75) DA 4 860
3 200 inv 8 060
(2 000) pd 6 060
(100) DA 5 960  All payments must be played off against oldest
2 000 Rev 7 960 debts
100 Rev 8 060  Debtor can’t choose “which debts” to pay
3 000 inv 11 060  Invoices must be recorded in month of
(1 200) pd 9 860 purchases
(1 300) pd 8 560  Returns can only decrease debts in month of
(600) pd 7 960 purchases
(1 000) pd 6 960
1 000 Rev 7 960
(7 960) pd 0

If he makes a payment of R13 000 in May, the following will happen:

13 000 (paid in May) – 7 960 (in March) = 5 040 – 4 020 (in April) = 1 020 – 1 020 (in May)

1.3 You are provided with the Debtors' Age Analysis of Sicwetsha Traders on 31 May 2014.
REQUIRED:

Identify THREE different problems shown by the Age Analysis and quote evidence and
figures from the question to support your answer. In each case suggest one internal
control measures to correct the problem. (9)
INFORMATION:
DEBTORS' AGE ANALYSIS ON 31 MAY 2014

Credit Policy: Debtors will be given 30 days in which to settle their debts.

NAME CREDIT TOTAL CURRENT 30 60 60

LIMIT MONTH DAYS DAYS DAYS+
 G Dreyer R5 000 R1 100 R 500 R 600
P Masala R3 500 R4 900 R1 600 R1 400 R1 900
M Roos R1 500 R2 350 R 750 R1 600
D Pule R1 500 R1 500 R1 000 R 500
L van Zyl R2 000 R2 700 R2 700
R12 550 R2 700 R2 850 R4 600 R2 400
100% 21,5% 22,7% 36,7% 19,1%

1.3 Identify THREE different problems shown by the Age Analysis and quote
evidence and figures from the question to support your answer. In each
case suggest two internal control measures to correct the problem.
Identification of THREE Internal control measure
different problems, with to correct each problem
evidence from the question
Problem 1 Credit limits  Any valid advice

P. Masala is exceeding his credit Do not sell on credit to

limits by R1 400. debtors who are likely to
exceed their limits 

M. Roos is exceeding her limit Ensure that they settle

by R850.  previous month’s debt
before buying on credit

Problem 2 Credit periods  Any valid advice
Charge interest on overdue
G. Dreyer 60 days accounts
P. Masala 60 days plus
M. Roos 60 days Offer discounts for early
D. Pule 60 days plus  payment 

Consider legal action

against problem debtors

Problem 3 Internal control over debtors  Any valid advice

Do not sell on credit to

L. van Zyl is exceeding her credit debtors who exceed their
limits by R700 and was still limits.
allowed to keep on buying on
credit in May, R2 000.  Account must be
frozen/blocked until
payment was made. 
9
9
4.2 CREDITORS' RECONCILIATION
A statement received from a creditor, Kairo Suppliers, on 28 February 2011, reflects that
Ace Traders owes them R11 390. According to Ace Traders, the amount outstanding is
only R7 910.
REQUIRED:
Use the table in the ANSWER BOOK to indicate the differences that were
discovered when comparing the account in the Creditors' Ledger with the statement
received from Kairo Suppliers.
Write only the amounts in the appropriate column and a plus (+) or minus (-) sign to
indicate an increase or decrease in the balance. Calculate the correct balance/total
(11)
at the end.
INFORMATION:
On investigation, it was found that:

1. An EFT for R3 000 issued by Ace Traders has not yet been recorded in the
statement received from Kairo Suppliers.
2. The EFT in settlement of the January account was not received by Kairo
Suppliers within 7 days; therefore the discount of R500 recorded by Ace
Traders in the Creditors' Ledger must be cancelled.
3. Returns recorded as R810 in the Creditors' Ledger of Ace Traders were
recorded as R900 in the statement received from Kairo Suppliers. Ace
Traders had miscalculated the cost of goods returned.
4. An invoice received from Kairo Suppliers was correctly recorded as R7 700
by Ace Traders. However, in the statement received from Kairo Suppliers it
was incorrectly recorded as R770.
5. An invoice for R3 500 received from Kairo Suppliers was incorrectly
recorded as a credit note by Ace Traders.

4.2 Use the table to indicate the differences that were discovered when comparing the account
in the Creditors' Ledger with the statement received from Kairo Suppliers.
11
Write only the amounts in the appropriate column and a plus (+) or minus (-) sign to
indicate an increase or decrease in the balance. Calculate the correct balance/total at the
end.

If extra entries are shown, award marks but -1 for the foreign item on each line (marks per line cannot be less than 0);
sign must be correct to earn marks; if no + sign assume positive,
accept brackets for a negative; accept figures in correct column even if on incorrect line
Creditors' Ledger of Statement from Kairo
Ace Traders Suppliers
Balance R7 910 R11 390
1  - 3 000
2  +500
 3  - 90
4  + 6 930
5 +3 500  +3 500 
OR
+7 000
Balance/Total 15 320  operation, both totals
15 320

QUESTION 3: CREDITORS' RECONCILIATION

KZ Stores purchase goods on credit from Valley Ltd.
REQUIRED:
3.1 The bookkeeper, Litzie, says it is not necessary for her to prepare a Creditors'
Reconciliation Statement because the creditors send monthly statements to the
business anyway. What would you say to her? State TWO points. (4)

3.2 Use the table in the ANSWER BOOK to indicate how the relevant balances will
change when preparing the creditors' reconciliation. Indicate the figure as well as
a + for increase and a – for decrease. The first transaction (Information A) has
been done for you. (16)

INFORMATION:

The following balances are provided:

In the account of Valley Ltd in the Creditors' Ledger of KZ Stores on

R112 820
30 September 2014:
On the statement received from Valley Ltd on 25 September 2014: R182 150

The following errors and omissions were discovered during an investigation:

A. A payment by KZ Stores of R9 000 was omitted from the Creditors' Ledger and
the statement.

B. An invoice for goods bought for R87 500 was reflected on the statement from
Valley Ltd but was not recorded by KZ Stores.

C. An invoice for R28 000 received from Valley Ltd was recorded correctly by KZ
Stores. The statement of account reflects it as R20 800.

D. KZ Stores had correctly recorded discount of R1 400 for early payment of their
account. This has not been reflected on the statement from Valley Ltd.

E. The statement reflects interest of R630 on the overdue account. Valley Ltd
acknowledged that an error had been made and promised to reverse the entry in
the October 2014 statement.

F. A debit note for R2 100 issued to Value CC was incorrectly recorded in the
account of Valley Ltd by KZ Stores.

G. A credit note for R5 250 received from Valley Ltd for goods returned was
incorrectly recorded as an invoice by KZ Stores.

H. Goods purchased from Valley Ltd on 30 September 2014 for R4 600 were
 recorded by KZ Stores. The statement from Valley Ltd is dated
25 September 2014.
3.3 Refer to Information B:
As the internal auditor of KZ Stores, you have detected that only R50 000 of these
goods were entered into the stock records by the storeman. The remaining goods
were ordered privately by J van Wyk, an employee in charge of creditors.
3.3.1 Explain what action should be taken against J van Wyk. State TWO points. (4)
3.3.2 What must the business do to prevent a similar incident in future? Explain
THREE points. (6)
QUESTION 3

3.1 The bookkeeper, Litzie, says it is not necessary for her to prepare a Creditors'
Reconciliation Statement because the creditors send monthly statements to the
business anyway. What would you say to her? State TWO points.

Any TWO valid points   Must be 2 separate points;

Award part-marks for incomplete answers
Expected responses:
 The statement could contain errors.
 This is an internal control measure.
 This will lead to detection of errors/omissions/fraud.
 To compare/check/reconcile the account to the statement.
 To ensure VAT return is correct / to assist in doing the VAT return.
4

3.2
No. Creditors' Ledger of Statement of account
KZ Stores received from Valley
Ltd
Balance 112 820 182 150
A – 9 000 – 9 000
B  + 87 500
C + 7 200
D  - 1 400
E  - 630
F  + 2 100
G  - 5 250  - 5 250
- 10 500 (2 marks)
H + 4 600
182 920 * 182 920 *
16

3.3 3.3.1 Explain what action should be taken against J van Wyk. State
TWO points. 4
Any two valid points   Must be 2 separate points; Cannot conflict with each other
Award part-marks for incomplete answers

 Must be subjected to a disciplinary hearing

 Open a criminal case at SAPS
 Redeploy pending decision / suspend pending decision (on
 outcome of the hearing/case)
 Require employee to refund/repay employer for the
costs/deduct from salary/take legal action for repayment
 Dismiss him as this is gross misconduct
Do not accept warning as a valid point for 2 marks unless candidate also mentions repayment as a
point – in context of R37 500 fraud, warning alone is not sufficient

For 1 mark:
Dismiss the employee / fire him; Warning; Redeploy him; Suspend
him; Sue him; Take legal action.

3.3.2 What must the business do to prevent a similar incident in

future? Explain THREE points.
Any THREE valid points    Must be 3 separate points;
For 2 marks:
 Division of duties so that each person serves as a check on
another / get someone else to authorise these transactions.
 Rotate duties so that employees do not have permanent
control over an aspect of the business.
 Conduct internal audits / check documents to detect the
fraud and errors.
 Physical stock control (to records) / check stock on hand to
stock records.
 When goods are received, the receiving officer must check
the stock received to the invoice and order form.
 Inform suppliers of the procedure for delivering goods to the
business and do not deviate from this. 6

“US” and “US”

DEBTORS RECONCILIATION Deb. control vs Deb. list

Pompom Trading Store: Debtors control and Debtors List

The following Debtors control account and Debtors Listing were prepared by an inexperienced bookkeeper at
Pompom Trading Store. On investigation a number of errors and omissions were discovered.

Required:
1.1 Prepare a correct Debtors control account.
1.2 Prepare a correct Debtors List on 30 April 20.7.

Information:
GENERAL LEDGER OF POMPOM TRADING STORE
STATEMENT OF FINANCIAL POSITION/BALANCE SHEET ACCOUNTS SECTION
Dr DEBTORS CONTROL B Cr
20.7 20.7
April 1 Balance b/d 5 000 April 30 Bank CRJ 4 200
30 Sales DJ 12 000 Discount allowed CRJ 210
Sundry accounts GJ 150 Debtors allowances DAJ 1 500
Sundry accounts GJ 70
Balance c/d 11 170
17 150 17 150
May 1 Balance b/d 11 170

DEBTORS LIST ON 30 APRIL 20.7

Debit Credit
Bill 610
Zondi 2 780
Tom 2 440
Collin 110
Lisa 3 980
Amina -
Japp -
9 810 110

Errors and omissions:

1. The total of the Debtors Journal was overcast by R150 (too much).
2. The total of the Debtors Allowances Journal amounted to R50 too little (undercast).
3. Stock sold on credit to Bill was wrongly entered in the relevant journal as R1 150 instead of R1 510.
4. The R110 credit on the account of Collin was for an amount received from him after his account had been
written off as a bad debt.
5. R50 interest must be charged on the overdue account of Zondi.
6. An EFT for R300 received from Tom had been posted twice. He had been allowed a discount of R15. No
entries were made to correct the error.
7. An invoice issued to Amina for R130 was posted incorrectly to the account of Lisa. The entry in the journal is
correct.
8. A receipt issued to Zondi for R970 was recorded correctly in the Cash Receipts Journal but was posted to his
account as R790.
9. A receipt issued to Tom for R1 270 was recorded correctly in the Cash Receipts Journal but was posted to his
account as R2 720.
10. Stock sold to Japp for R450 was incorrectly posted to the account of Tom. The entry in the journal is correct.

11.11.1 DEBTORS CONTROL

11 170 – 150 + 360 + 300 +175 – 50 = 11 805

11.11.2 DEBTORS LIST ON 30 APRIL 20.7

Bill [610 + 360] 970
Zondi [2 780 + 50 – 180] 2 650
Tom [2 440 + 300 + 15 + 1 450 – 450] 3 755
Collin [-110 + 110] 0
Lisa [3 980 – 130] 3 850
Amina 130
Japp 450
Balance as per Debtors control account 11 805