Purchases Ledger Control Accounts (Cambridge (CIE) IGCSE Accounting)

Revision Note

Purchases Ledger Control Accounts

Where do I find the information to complete a purchases ledger control account?

  • The books of prime entry are used to find the totals

  • The purchases journal is used to find the total value of credit purchases

  • The purchases returns journal is used to find the total value of returned goods

  • The cash book is used to find the total values for:

    • Money paid to credit suppliers

    • Money refunded by credit suppliers

    • Cash discounts received from credit suppliers

  • The journal is used to find the total values for:

    • Interest charged by credit suppliers on overdue accounts

    • Contra entries against the sales ledger

Information is gathered from the purchases journal, puchases returns journal, cash book and general journal

Examiner Tips and Tricks

The ledger accounts are not used when preparing control accounts. The information is taken from the books of prime entry.

Why might there be a debit balance in a purchases ledger control account?

  • A trade payables account will usually have a credit balance

    • This indicates that the business owes the credit supplier money

  • However, a trade payables account could have a debit balance

    • This indicates that the credit supplier owes the business money

  • Debit balances can occur when:

    • The business pays credit suppliers in advance

    • The business makes overpayments to credit suppliers

    • The business is owed refunds from the credit suppliers

      • The business has paid for goods and then returned them

  • Debit and credit balances are totalled separately in the purchases ledger control account

    • This means there could be two opening balances and two closing balances

What is the layout of a purchases ledger control account?

  • The layout looks very similar to the layout of a trade payables ledger account

  • The main differences are:

    • There could be two opening balances

    • There could be two closing balances

Entries on the debit side:

Entries on the credit side:

  • Opening balance

    • Money that credit suppliers owe

  • Purchases returns

    • Credit purchases only

  • Bank

    • Bank transfers to credit suppliers

  • Cash

    • Cash paid to credit suppliers

  • Discount received

  • Contra

  • Opening balance

    • Money owed to credit suppliers

  • Purchases

    • Credit purchases

  • Interest

  • Bank

    • Refunds from credit suppliers

Layout of a purchases ledger control account
Layout of a purchases ledger control account

Examiner Tips and Tricks

Remember that cash purchases are not recorded in the purchases ledger. Only enter cash paid to credit suppliers when the cash is used to make a payment towards an invoice.

Worked Example

Mika is a trader. He has provided the following information

2023

$

1 March

Purchases ledger control account credit balance

17 150

Purchases ledger control account debit balance

1 350

2024

29 February

Totals for the year:

Credit purchases

231 200

Cash purchases

5 000

Bank payments to credit suppliers

210 600

Cash payments to credit suppliers

1 500

Returns to credit suppliers

6 400

Discount received

3 200

Contra entries

2 100

Interest charged by credit suppliers

800

Purchases ledger control account credit balance

?

Purchases ledger control account debit balance

450

Prepare the purchases ledger control account for the year ended 29 February 2024. Balance the account and bring down the balances on 1 March 2024.

Answer

Ignore the cash purchases, as they do not affect the purchases ledger accounts.

Enter the balances and totals on the correct sides of the account.

Transactions which increase the amount the business owes appear on the credit side.

  • Credit purchases

  • Interest

Transactions which reduce the amount the business owes appear on the debit side.

  • Payments to credit suppliers using cash or bank transfers

  • Purchases returns

  • Discount received

  • Contra entries

At the end of the month there is $450 debit balance. On 1 March 2024, there will be a debit balance of $450; therefore, there will need to be a balance c/d on the credit side on 29 February 2024.

Mika
Purchases Ledger Control Account

Date

Details

$

Date

Details

$

2023

Mar 1

 

Balance b/d

1 350

2023

Mar 1

Balance b/d

17 150

2024

Feb 29


Bank


210 600

2024

Feb 29


Purchases


231 200

29

Cash

1 500

29

Interest

800

29

Purchases returns

6 400

29

Balance c/d

450

29

Discount received

3 200

29

Contra

2 100

29

Balance c/d

24 450

   

249 600

249 600

Mar 1

Balance b/d

450

Mar 1

Balance b/d

24 450

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Dan Finlay

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