Control Accounts, errors and omissions

1. Presentation
on
Control Accounts, errors and omissions
January 04, 2019
Conducted by:
Mohammad Ibrahim Khalil, FCA
Chief Financial Officer
Bank Asia Limited

2. Scope of study
Cash Book
Entries not recorded
Adjusted Cash Book
Bank Reconciliation
Not reflected in Bank
Error
Adjustment entries
Rectification

3. Nominal ledger account in which,
- a record is kept of the total value of a number of similar individual items.
- mainly used for trade receivables and payables.
Receivables control account: in which records are kept of transactions
involving all receivables in total.
Payables control account: in which records are kept of transactions involving
all payables in total.
Control Account

4. Personal accounts
The amount owed by each credit customer is a balance on the receivables
ledger.
The amount owed by all the credit customer together is the balance on the
receivables control account.

5. Balance on the receivables control account = the sum of the individual
balances on the receivables ledger.
An organization have four trade receivable clients with having different
receivable amount:
Control Account and Personal Account
i. ABC Tk. 20
ii. XYZ Tk. 30
iii. DEF Tk. 25
iv. UVF Tk. 40
Total Tk.115
Personal Account
Receivable Control Account
Receivable Control Account Dr
Sales Cr

6. Operating control accounts
Contra: a person or business both a customer and a supplier, amounts
owed by and owed to the person may be ‘netted off’ by means of a contra.
Dr: Payables control a/c
Cr: Receivables control a/c
Irrecoverable debt: When a debt owed by a customer will never be paid,
the total amount is removed from receivables:
Dr: Irrecoverable debt expense
Cr: Receivables control a/c
Dishonored cheque: Customer’s cheque is paid into the business’s bank
but the customer’s bank refuses to honor payment:
Dr : Receivables control a/c
Cr : Cash

7. Operating control accounts
Accounting for wages :
The wages control account is used:
 To maintain the accuracy of payroll double entry
 To identify errors in payroll double entry.
When using the wages control account the objective is that at the end of
the process the account balance clears to zero: it is a clearing account.
This will affirm that the double entry has been made correctly, though
compensating errors could still exist.

8. Operating control accounts
Withholding
tax deduct.
Provident
Fund
deduct.
Net Pay Gross Pay Company
PF
contribution
Total Salary
expenses
Mr. AA 550 150 2,300 3,000 200 3,200
Mr. BB 500 135 2,115 2,750 180 2,930
Ms. CC 460 125 1,915 2,500 165 2,665
1,510 410 6,330 8,250 545 8,795
To record net pay expenses:
Dr : Wages Control A/c Tk. 6,330
Cr : Cash at Bank Tk. 6,330

9. Objective of Control Account
 To check the accuracy of entries
 Locate errors in posting promptly
 Provide internal check
 Provide total receivable and payable balances
 Keep manageable size of no. of a/c in trial balance

10. Cash at bank account, cash book and bank statement
The cash book is the book of original entry for all transactions related to the
company’s bank account.
The cash at bank account is the nominal ledger account (part of the double
entry system) that is the permanent record of the business’s bank
transactions.
The bank statement is a record of transactions on the business’s bank
account maintained by the bank in its own books.

11. Cash Book
Entries not recorded
Adjusted Cash Book
Bank Reconciliation
Not reflected in Bank
Bank Reconciliation

12. Bank Reconciliation is a comparison of a bank statement (sent monthly,
weekly or even daily by the bank) with the cash book.
Following items on the bank statement and in the cash book to be followed:
• Errors in the cash book
• Corrections and adjustments to the cash book
• Errors in the bank statement
• Items reconciling the correct cash book to the bank statement (timing
difference)
 Unpresented cheques
 Uncleared lodgements.
Bank Reconciliation

13. Cash book balance Tk. 1,000. Bank statement showed Tk. 1300 – credit.
Following difference was found:
a) Cash book under cast by Tk. 100 in Dr. side
b) Cheques paid in but not yet credited by the Bank: Tk.200
c) Cheques drawn not yet presented to the Bank were Tk.400
Bank Reconciliation
a) Cash book:
Balance b/f Tk.1,000
under cast Tk.100
Corrected balance Tk.1,100
b) Bank Statement
Balance – statement Tk.1,300
Uncleared lodged Tk. 200
Unpresented cheques Tk. (400)

14. Bank statement showing balance Tk. 350, closing balance of cash book
shows Tk. 200. Following transaction made, find out reconciliation and effect
on Bank Balance:
Bank Reconciliation
Bank mistakenly credit Tk. 150 belonging to
other clients
Tk. 100 received by bank under a standing
order arrangement has not entered in the
cash book
Cheques Tk. 2900 have been drawn, entered
into cash book & send supplier but they have
not presented for payment.
Cheques Tk. 3,000 have been received and
entered in the cash book but yet not credited
in the bank statement.
Increase Decrease No effect

15. CASH
B/d 200 Balance c/d 300
Standing order 100 ___
300 300
Bank Reconciliation
Bank Statement:
Balance Tk. 350
Add: uncleared lodgement Tk. 3,000
Less: Unpresented cheques Tk. (2,900)
Bank error Tk. (150)
Tk.300

16. Last year question
Mr. Wasi has received his bank statement for the month of December 2015. The bank statement dated
31 December 2015 showed a credit balance of Tk.14,130 whereas his cash book showed a debit
balance of Tk.47,330. On scrutiny the cash book and bank statement, the following discrepancies were
noted:
1) Bank charges of Tk. 60 had not been entered in the cash book. ( - )
2) Cheques drawn by Wasi and totaling to Tk. 450 had not yet been presented to the bank. ( - )
3) Wasi had not entered receipts of Tk. 530 in his cash book. ( + )
4) The bank had not credited Wasi with receipts of Tk. 1,970 deposited into the bank on 31 Dec 2015.
5) Standing order payments amounting to Tk. 1,240 had not been entered in the cash book.
6) Wasi had entered a payment of Tk. 560 in his cash book as Tk. 650.
7) A cheque received for Tk. 300 from a debtor had been returned by the bank, but this had not been
written back in the cash book.
8) Wasi had brought down his opening cash book balance of Tk. 6,585 as a debit balance instead of as
a credit balance.
9) An old cheque payment amounting to Tk. 880 had been written back in the cash book, but the bank
had already honored it.
10) Some of Wasi’s customers had paid to settle their debts by direct debit. Unfortunately, the bank had
credited some direct debits amounting to Tk. 16,650 to another customer’s account
Requirement: a) adjusted cash book (7 M); b) bank reconciliation (7M)

17. Req. a) adjusted cash book:
Balance as per cash book 47,330
Add:
Receipts not entered 530
Error of original entry in cash book 90
Less:
Bank Charges 60
Standing order payments 1240
Dishon Cheque
300
Error in balance (6585*2) 13,170
Old cheque return 880
Corrected Cash 32,300
Req. b) Bank reconciliation:
Balance as per bank sta. 14,130
Add: uncredited deposit 1,970
Direct debit to another customer 16,650
Less: unpresented cheque 450
Balance as per cash book 32,300

18. Cash book of Andrew Chain revealed Tk. 50,700 (Dr) in the bank statement on June 30, 2018.
However, the bank statement showed Tk. 57,185 (CR) as at July 2, 2018. On scrutiny, following
found:
i) Bank charges Tk. 300 and bank interest Tk. 500 shown in the bank statement on June 30 had
not been entered in the cash book;
ii) Jeffery, a debtor deposited Tk. 4,500 to the bank account directly on July 2,
iii) Cheque amounting to Tk. 2000 issued to supplier on 25 June and posted to cash book had
been presented to bank on July 1, 2018;
iv) Dividend amount to Tk. 500 had been paid direct to the bank on June 30 and not entered on
cash book
v) Cheque amounting to Tk.6500 send to bank for collection, though entered in the cash book Tk.
5600 erroneously, had not been credited by the bank
vi) Refund warrant Tk. 7000 for share application in primary market was deposited direct to bank
on June 29 and bank charge Tk.115 as commission (including 15% vat) for processing the
refund warrant, this have not been entered in the cash book
Req: a) rewrite the cash book for June 30
b) Prepare a statement reconciling the revised balance in the cash book with a balance as per bank
statement as at June 30.
c) Which bank balance will appeared in BS of Andrew Chain as at June 30 and why?
Last year question

19. Last year question
Balance bd 50,700 Bank charges 300
Bank interest 500 Bank charges 115
Dividend 500 59,185
A/R (6500-5600) 900
Refund warrant 7000
59,600 59,600
Req b:
Revised balance 59,185
Add: cheque issue but not presented 2000
Less: Cheque send to bank for collection and entered in the cash book 6500
54,685
Req c: Tk. 59,185 will appear in Balance sheet as at June 30, 2018
Req a:

20. Simon Smiths is an accountant of Creative Playhouse and has a limited knowledge of accounting. Simon prepared the
following balance sheet which contains certain errors with respect to Generally Accepted Accounting Principles:
Creative Playhouse
Balance Sheet as at 30 June 2013
Assets Taka Liabilities & Owner’s Equity Taka
Cash at Bank 20,000 Liabilities:
Accounts receivables 15,000 Accounts payable 12,400
Office furniture 9,500 Others payable 22,000
Theatre building 35,000 Owner’s equity
Lighting equipment 42,000 Capital 126,000
Automobile 50,000 Retained earnings 40,100
Office Supplies 3,500
Other assets 25,000
Total 200,500 Total 200,500
In discussion with Simon, the following facts are discovered:
i. Cash at bank balance, Tk. 20,000 includes Tk. 1,000 in Simon’s personal savings account.
ii. Simon explained the office furniture was purchased on 12 September 2013 for Tk. 15,000. The business paid Tk.
9,500 in cash and issued a note payable for the remaining of the purchase price, Tk. 5,500. As the note is not
due until January 2014, it was not included in the company’s liabilities.
iii. Also included in the amount of office furniture, is a computer that cost Tk. 1,500 but was not on hand because
it was donated to a local charity.
iv. The Accounts payable include business debts of Tk. 11,400 and Tk. 1,000 balance of Simon’s personal VISA card.
You are required to prepare corrected balance sheet of Creative Playhouse as at 30 June 2013

21. Creative Playhouse
Balance Sheet (revised)
As at 30 June 2013
Assets Taka Liabilities & Owner’s Equity Taka
Cash at bank (note 1) 19,000 Liabilities:
Accounts receivables 15,000 Accounts payable 11,400
Office furniture (note 2) 13,500 Others payable 27,500
Theatre building 35,000 Owner’s equity:
Lighting equipment 42,500 Capital 126,000
Automobile 50,000 Retained earnings 38,600
Office Supplies 3,500
Other assets 25,000
Total 203,500 Total 203,500

22. 1. Cash at bank
Cash at bank as reported 20,000
Less: Balance in Simon’s personal savings accountant (1,000)
Cash at bank (revised) 19,000
1. Office furniture
Office furniture as reported 9,500
Add: Office furniture purchased on credit 5,500
Less: Computer donated to local charity (1,500)
Accounts receivable (revised) 13,500
1. Accounts payable
Accounts payable as reported 12,400
Less: Simon’s personal Visa card (1,000)
Accounts payable (revised) 11,400
1. Other payables
Other payables as reported 22,000
Add: Office furniture o credit 5,500
Other payables (revised) 27,500
1. Retained Earnings
Retained earnings as reported 40,100
Less: Computer donated to charity (1,500)
Retained earnings (revised) 38,600

23. At the end of 30 June 2015, Gouri’s cash book showed that she had an overdraft of Tk. 300 on
her current account at the bank. A bank statement as at 30 June 2015 showed that she has an
overdraft of Tk. 150. On checking the cash book and bank statement you found the following:
(i) Cheques issued to a supplier amounting to Tk. 485, had been entered in the cash book, but
not yet been presented by the supplier.
(ii) Cheques received and deposited amounting to Tk. 400 had been entered in the cash book,
but had not yet been credited by the bank.
(iii) Bank charges Tk. 35 debited by the bank but it was not credited in the cash book.
(iv) A customer has deposited Tk. 200 directly into the bank which has not been recorded in the
cash book.
(v) A cheque for Tk. 50 from Banani was recorded and banked on 24 June. This was returned
unpaid on 30 June. No entry has been made in the cash book.
(vi) An insurance premium paid of Tk. 50 is transferred by the bank as per previous instruction,
but was recorded by the bank on 5 July 2014. This amount was duly credited in the cash book.
(vii) A cheque Tk 20.000 has been deposited in the bank on 26 June 2015 but necessary entry
was not made in the General ledger. However, the said cheque was not honored due to invisible
issuer signature.
Requirement: a) adjusted cash book (5 M); b) bank reconciliation (5M)
Last year question

24. Bank Reconciliation
On 31 December 2013, Sami’s cash book showed an overdraft of Tk. 4,500 on his current
account. A bank statement at 31 December 2013 showed that Sami was in credit with
the bank by Tk. 4,000.
(i)On checking the cash book with the bank statement, the following are detected: (i)
Cheque drawn amounting to Tk. 1,000, entered in the cash book but not yet presented.
(ii) The bank had transferred interest received on savings account of Tk.1,500 to current
account, recording the transfer on 20 January 2014. This amount had been entered in
cash book on 30 December 2013.
(iii) The payments side of cash book had been undercast by Tk.1,000.
(iv) A cheque for Tk. 5,000 drawn on savings account had been shown in the cash book as
drawn on current account.
(v) A cheque issued to Namira for Tk. 2,500 was replaced being out of date. It was
credited again in the cash book. Both cheques were included as the un-presented
cheque.

25. Error in accounting
Transposition errors
When two digits in an amount are accidentally recorded
the wrong way round. (instead of 5353, 5335)
Errors of omission Failing to record a transaction at all, or making a debit or
credit entry, but not the corresponding double entry.
Errors of principal
Making a double entry in the belief that the transaction is
being entered in the correct accounts, but subsequently
finding out the accounting entry breaks the ‘rules’ of an
accounting principal or concept.
Errors of commission
A mistake is made in recording transactions in the
ledger accounts. (Telephone expenses recorded as
electricity expenses.
Compensating errors Errors which are, coincidentally, equal and opposite to
one another. (2822/2282, 8931/8391)

26. Journal:
Equal debit and credit entry to be passed.
Correcting Errors
A Co. wrongly reported Tk. 5,000 under Tax expenses instead of Electricity
expenses. Trial balance sum is Tk. 1,00,000 both side.
Debit: Electricity Tk.5,000
Credit: Tax Expenses Tk. 5,000

27. Correcting Errors
 A Co. receives an invoice for Tk. 500 from a supplier which was omitted
from the books entirely;
 Repairs Tk. 200 wrongly debited to Non- current assets;
 Sales reduced by Tk.250 as its presentation was not sure, in fact it was
drawing;
 Sales figure was added Tk. 3,250 instead of 3,520

28. Suspense Accounts
An account showing a balance equal to the difference in a trial balance
A suspense account is a temporary account which can be opened for the
following reasons-
 A trial balance is drawn up which does not balance
 The bookkeeper of a business knows where to post one side of a
transaction, but does not know where to post the other side.
Correcting Errors

29. A Company, on March 31, 2016, includes these selected accounts before adjusting entries
are prepared.
Debit Credit
Prepaid Insurance 3,600
Supplies 2,800
Equipment 25,000
Accumulated Depreciation—Equipment 5,000
Unearned Service Revenue 9,200
Correcting Errors
- An analysis shows the following:
- Insurance expires at the rate of 100 per month.
- Supplies on hand total 800.
- One-half of the unearned service revenue
was earned in March.
- The equipment depreciates 200 a month
Prepare the adjusting entries for the month of March

30. Correcting via ETB
Error may be corrected through Extended Trial Balance (ETB)

31. Last year question
(M/J 14 Q 4)
“A balanced trial balance does not always prove that the company has
recorded all transactions or that the ledger is correct” – Mention three
types of errors in support of this statement 6 Marks

32. Hywel plc's trial balance includes a total for all the receivables ledger accounts as
listed out at the year end. The receivables ledger is part of the double entry system.
The trial balance fails to agree and a suspense account is opened. The difference is
due to the following errors in Hywel plc's ledger accounts:
1. The balance on Markham plc's receivables ledger account is £9,890. This is
incorrectly recorded in the trial balance as £9,980
2. A discount allowed to Umberto of £33 was debited to his receivables ledger
account
3. The sales account is overcast by £110
Three journals are drafted to correct these errors. Together these journals should:
A credit the suspense account with £110
B debit the suspense account with £86
C credit the suspense account with £46
D debit the suspense account with £46
Question No. 1

33. This question is not asking for the balance on the suspense account, but for the
adjustment made to the suspense account by the correcting journal.
A single journal to correct all these errors would be:
CR Receivables (90 + 66) 156
DR Sales 110
DR Suspense (9,980 – 9,890) + (2 × 33) – 110 46
156 156
The debit entry in the suspense account is £46 (D)
Answer is D
Answer (Q. No. 1)

34. Dredge plc makes only statutory deductions from employees' pay, which are all paid to
HMRC when due. In March 20X6 Dredge plc paid £18,538 to its employees by bank
transfer. Gross pay for the month of £28,456 was debited to the salaries expense account,
but a debit balance of £3,983 remained on the salaries control account. This balance
represented:
A employer's NIC which should be debited to the salaries expense account
B employer's NIC which should be credited to the HMRC liability account
C total PAYE and NIC owed to HMRC for March which should be debited to the
salaries expense account
D PAYE and employees' NIC deducted from gross pay which should be debited to
the salaries expense account
Question No. 2

35. Employer’s NIC is an expense to the business in addition to gross pay, so it should be
debited to the salaries expense account from the control account (A). B is incorrect as it
suggests that the debit balance on the control account should be credited to the liability
account. Employees’ NIC and PAYE are not additional expenses, so the remaining debit
balance after gross pay has been charged cannot be these (C and D).
Answer is A
Answer (Q. No. 2)

36. Limbo plc maintains its petty cash records using an imprest system. The total petty cash float is
topped up monthly to £300. During the month of August the following expenses were paid from petty
cash:
Stationery 36 £
Tea and coffee 60 £
Stamps 120 £
In error, the purchase of stamps was recorded as £12 and as a result a cheque for £108 was written
to top up the petty cash float.
The error made will result in which of the following?
A . An imbalance in the trial balance of £108 and the petty cash balance being £108 less than it
should be
B. An understatement of expenses of £108 and the petty cash balance being £192 less than it
should be
C. An understatement of expenses of £108 and the petty cash balance being £108 less than it
should be
D. An imbalance in the trial balance of £192 and the petty cash balance being £192 less than it
should be
Question No. 3

37. The difference in the amount at which the purchase of stamps was recorded is £120 – £12 = £108.
As only £12 was recorded expenses have clearly been understated. Petty cash should have been
topped up with (£36 + £60 + £120) = £216, so the £108 top-up is £216 – £108 = £108 too little (C).
Answer is C
Answer (Q. No. 3)

38. THANK YOU
Contact: +88-01916865979
email: ibrahim.Khalil@bankasia-bd.com