Trade Payables Ledger Control Account (Edexcel IGCSE Accounting)

Spec point — IGCSE_ACCOUNTING:S3.151

Trade payables ledger control account

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

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

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

• The purchases returns day book 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

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

Why might there be a debit balance in a trade payables 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 trade payables ledger control account

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

What is the layout of a trade payables 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

• Use the name of the book of original entry as the detail

  • Put more information in brackets

Layout of a trade payables ledger control account

Exam Hint Remember that cash purchases are not recorded in the payables 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	Trade payables ledger control account credit balance	17 150
	Trade payables 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
	Trade payables ledger control account credit balance	?
	Trade payables ledger control account debit balance	450

Prepare the trade payables 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 payables 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 a $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.

Final answer: Mika Trade Payables Ledger Control Account

Final answer: Date	Final answer: Details	Final answer: $**	Final answer: Date	Final answer: Details	Final answer: $
Final answer: 2023 Final answer: Mar 1	Final answer:** ** Final answer: Balance b/d	Final answer: 1 350	Final answer: 2023 Final answer: Mar 1	Final answer: Balance b/d	Final answer: 17 150
Final answer: 2024 Final answer: Feb 29	Final answer:** ** Final answer: Cash book (bank)	Final answer:** ** Final answer: 210 600	Final answer: 2024 Final answer: Feb 29	Final answer: Purchases day book	Final answer: 231 200
Final answer: 29	Final answer: Cash book (cash)	Final answer: 1 500	Final answer: 29	Final answer: Journal (interest)	Final answer: 800
Final answer: 29	Final answer: Purchases returns day book	Final answer: 6 400	Final answer: 29	Final answer: Balance c/d	Final answer: 450
Final answer: 29	Final answer: Cash book (discount received)	Final answer: 3 200
Final answer: 29	Final answer: Journal (contra)	Final answer: 2 100
Final answer: 29	Final answer: Balance c/d	Final answer: 24 450			Final answer:**
		Final answer: 249 600			Final answer: 249 600
Final answer: Mar 1	Final answer: Balance b/d	Final answer: 450	Final answer: Mar 1	Final answer: Balance b/d	Final answer: 24 450