in my exercise balance on slca is higher than total of the balances in the sales ledger. They ask what two reasons could explain the difference.
scenario a) 'Discounts allowed were entered in the sales ledger account only' - this option is wrong and i don't know why.
Let's say I made sale to Mr Brown for 100 pounds.
Receivables Dr 100
Mr Brown Dr 100
If I enter discounts allowed only on Mr Brown account ( let's say 20 pounds ) I have balance on Mr Brown's account 80 pounds and balance on Receivables 100 pounds. Slca is still higher.
1. So why scenario a) is wrong ?
2. How to approach this kind of exercises so that I can find correct answer whenever I am supposed to find the correct answer ?
You've added up the first part of the question wrong. The correct answer means that the customer ledger is more than the sales ledger control account. That leaves two possible answers whereas your figure left 3 possible answers.
Please ignore this, as per Vince comment below.
-- Edited by Leger on Wednesday 14th of December 2016 04:59:12 PM
-- Edited by Leger on Wednesday 14th of December 2016 05:00:21 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
In option 2, do they mean the sales ledger control account?
Hi John
When you say option 2 are you talking about the 5 choice Rafal has got to choose from - so they are asking if the suggestion of the alteration to the sales ledger only would give the difference between the ledger and the control.
Hi Rafal
How are you doing with this now that Vince has dropped a big hint. Key - work out what impact each suggestion has.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
well, let's say that among five options to choose from the one on top is 1 and the one on bottom is 5 ( the one with cheque ). Second from the top is 2 etc.
All I know is that sales returns and discounts allowed are entered on credit side of sales ledger control account and on credit side of personal accounts in sales ledger. It means that both sales returns and discount allowed decrease debit balances in slca and in sales ledger.
option 1-if goods returned have been entered in customer's account in sales ledger twice it means that debit balance in sales ledger is smaller when compared to debit balance in slca. Option 1 is probably correct
option 2-my understanding is that debit balance in sales ledger is decreased by discounts allowed whereas slca's debit balance is not decreased by discounts allowed cause discounts allowed were not entered in slca. Therefore debit balance on slca is higher than debit balance . Option 2 seems to be correct too
option 3-sales returns were omitted from slca which means that debit balance on slca wasn't decreased and debit balance in sales ledger was decreased by sales returns. Therefore debit balance on slca is higher when compared to debit balance on sales ledger. Option 3 seems to be correct too.
I have three ' correct' options so far and unfortunately only two out of five are correct. Can we ignore two bottom options at the moment and you guys help me to understand which one out of three above is incorrect and why ?
As Joanne says, I dropped a hint when I pointed out to John that one of the balances is a credit.
Although there can be exceptions (and therefore that credit balance might very well be correct) the fact that it's there should serve as a clue - especially given that the overall discrepancy is that the sales ledger has a higher *debit* balance than the sum total of the individual customer balances. The cause of the difference, therefore, is something that either:
a) reduces the debit balance on the individual customer accounts, and therefore their overall total
b) or increases the debit balance on the sales ledger account.
You need to consider which options could have either one (or both) of those outcomes.
And reading the options carefully (in case there are mistakes in the wording - which we've seen before) I can confirm that there are definitely only two of them.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
thanks to all of you for replies. Vince, please tell me why second option is wrong ? i have troubles to figure it out on my own. Option 2 fulfills your condition. We have double decrease in sales ledger and single decrease in sales ledger control account therefore debit balance in sales ledger control account is higher. Still , this option is incorrect. My problem is that I don't understand why second option is incorrect.
-- Edited by rafapak on Wednesday 14th of December 2016 08:46:07 PM
-- Edited by rafapak on Wednesday 14th of December 2016 09:29:50 PM
The second option suggests a discount being applied to the main sales ledger account only, and not the individual customer account. Obviously that's going to cause a difference, but consider whether a discount should go on the debit or credit side of the account - and, given the side it goes on, what it would mean for the difference.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
The second option suggests a discount being applied to the main sales ledger account only, and not the individual customer account. Obviously that's going to cause a difference, but consider whether a discount should go on the debit or credit side of the account - and, given the side it goes on, what it would mean for the difference.
thanks for reply. i think you are wrong because option two stipulates that discount allowed was entered only in individual customer account ( sales ledger includes individual accounts ) . Discount allowed is entered on credit side of customer account and decreases debit balance. Therefore debit balance on sales ledger control account is higher when compared to debit balance on customer account . Your condition is fulfilled but still this option is wrong. Why ?
Ah, okay, I can see where the problem lies- and you have a valid point, so questioning it is sensible. I hadn't registered that wording previously.
I'm inclined to think that where they say "the sales ledger account" for option two, they mean "the sales ledger control account" rather than an individual customer account on the sales ledger - but, unfortunately, I can't see anything in those images you posted that would support that opinion; such as another use of "the sales ledger account" to refer to the control account itself.
I could point to the fact that they only say "the sales ledger account" rather than "the customer's account on the sales ledger" - but equally, you could point out that they only say "the sales ledger account" rather than "the sales ledger control account".
All things considered, I think the best suggestion is to treat that slightly different terminology as a part of the test: given that there is an argument for interpreting it either way, and there are supposed to be only two correct answers - i.e. if one interpretation leads to the correct number of answers, and one doesn't, then perhaps the correct interpretation is the one that leaves the right number...
... and perhaps raise the point with someone who is involved in your studying/training (if that's possible?)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
As an afterthought, I've only just spotted that your *original* question was specifically about that option - so it seems you'd already pared the options down to three and was trying to get your head around that one. I therefore appear to have wasted your time a little bit by trying to guide you towards answering the whole question. Sorry about that. :/
(But see my previous answer about that specific option)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
In option 2, do they mean the sales ledger control account?
Hi John
When you say option 2 are you talking about the 5 choice Rafal has got to choose from - so they are asking if the suggestion of the alteration to the sales ledger only would give the difference between the ledger and the control.
Yes. I could see why Rafal had chosen that option, and I had also narrowed it down to three if I took the same assumption. I agree with Vince about why it was more likely to interpret it as the sales ledger control account, as I had noticed on one of the other questions it had mentioned customer accounts, hence the question.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
