Question
Kestwick Traders keeps an Accounts Receivable control account in the general ledger and a separate memorandum ledger of individual customer accounts. Totals for May 2026 from the books of prime entry:
| Item | Amount |
|---|
| Balance at May 1 (debit) | $48,600 |
| Credit sales (sales day book) | 126,400 |
| Cash received from credit customers | 112,300 |
| Discounts allowed to credit customers | 2,100 |
| Sales returns from credit customers | 3,800 |
| Irrecoverable debts written off | 1,500 |
| Customer cheque dishonoured by the bank | 900 |
| Contra: balance set off against the same supplier's account in the payables ledger | 1,200 |
The individual customer balances listed at May 31 totalled $54,210. Investigation found:
- The sales day book was undercast (added up too low) by $1,000. The individual customer accounts were posted correctly.
- A customer balance of $1,450 was left off the list.
- A balance of $3,250 was copied onto the list as $2,350.
- A customer with a credit balance of $280 was listed as a debit balance.
Required:
- Control Account — prepare the Accounts Receivable control account for May (T-account format), naming each posting after the other account and dating every posting May 31, and balance it off on May 31 before correcting the undercast. Use Sales Revenue, Cash, Sales Discounts, Sales Returns and Allowances, Bad Debt Expense and Accounts Payable.
- Correcting Entry — the journal entry to correct the undercast. Use Accounts Receivable and Sales Revenue.
- Corrected Control Balance — the corrected control account balance.
- List Adjustment — the net amount to add to the $54,210 list total to correct it.
Statements in this challenge
- Control AccountLedger
- Correcting EntryJournal Entry
- Corrected Control BalanceNumeric Answer
- List AdjustmentNumeric Answer
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — Presentation of Financial Statements
Work the cycle in its fixed order: journalise, post to the ledger, extract an unadjusted trial balance, pass adjusting entries, extract an adjusted trial balance, prepare the statements, then close the temporary accounts. Each step consumes the output of the one before it, so an error early on propagates all the way to the closing entries rather than staying local.
Common mistakes
- Preparing the financial statements from the unadjusted trial balance instead of the adjusted one.
- Closing permanent accounts — assets, liabilities and capital carry forward; only revenue, expense and drawings/dividends close.
- Forgetting that the post-closing trial balance should contain no income statement accounts at all.
Further readingIAS 1: what goes where in a full set of statements