STUDY UNIT 9 – TRADE AND OTHER RECEIVABLES

The following is an extract from the general ledger of Smart Boutique for December 20.1:

Dr Trade receivables control Cr

R R
20.1 20.1
Dec 1 Balance (correct) b/d 16 095 Dec 31 Sales returns (credit sales) 2 220
31 Bank (total: trade receivables Credit purchases 33 801
column) 45 495 Cash purchases 1 008
Settlement discount granted 685 Settlement discount received 275
Credit sales 48 165 Bank (total trade payables
Drawings 150 column) 3 980
Purchases returns (credit Balance c/d 70 587
purchases) 2 131
112 296 112 296
20.2
Jan 1 Balance b/d 70 587

2. Additional information

2.1 An inexperienced bookkeeper prepared the trade receivables control account.

2.2 In addition to the errors made in the trade receivables control account above, an investigation
revealed the following:
 The total of the trade receivables balances as per the list of trade receivables at
31 December 20.1 amounted to R16 060.
 An amount of R115, which has been written off as credit losses, has erroneously been
added to the credit sales amount of R48 165. This entry has been posted correctly to the
applicable account in the trade receivables ledger.
 The sales journal was overcast by R420.
 Credit sales of R170 was posted correctly to the sales account and the trade receivables
control account in the general ledger but was not posted to the specific debtor’s account
in the trade receivables ledger.
 Credit note number 003 for R70 was recorded correctly in the sales returns journal but
posted to the wrong side of the personal account of the debtor in the trade receivables
ledger.
 The trade receivables column in the cash receipts journal includes an amount of R195
being a cash settlement discount received from a creditor.
 The purchases journal was under-cast by R718.
 An account of R1 603 for freight on credit sales was received from Quick Transport. The
cost of the freight must still be accounted for in the accounting records.
 On 1 December 20.1, the balance of the trade payables control account amounted to
R8 340.

REQUIRED:
(a) Prepare the correct, properly balanced trade receivables control accounts for Smart Boutique
for December 20.1.
b) Prepare the reconciliation of the total of the list of trade receivables balances with the final
balance of the trade receivables control account as calculated in question (a) above.