CIMA BA3 · Chapter 5
Receivables and payables control accounts MCQs with Answers
10 multiple-choice questions on Receivables and payables control accounts for CIMA BA3 Fundamentals of Financial Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
What is the main purpose of a receivables ledger control account?
- A) To record the amount of each individual invoice sent to customers
- B) To calculate the allowance for receivables
- C) To provide an arithmetical check on the accuracy of the individual customer accounts in the receivables ledger
- D) To replace the need for a sales day book
Show answer & explanation
Answer: C) To provide an arithmetical check on the accuracy of the individual customer accounts in the receivables ledger
The control account summarises all postings to the receivables ledger in total. Comparing its balance with the total of the individual customer balances helps detect errors and fraud. Individual invoices are recorded in the sales day book and customer accounts.
Question 2
Which of the following items would NOT appear in the receivables ledger control account?
- A) An increase in the allowance for receivables
- B) Irrecoverable debts written off
- C) Cash received from credit customers
- D) Sales returns from credit customers
Show answer & explanation
Answer: A) An increase in the allowance for receivables
The allowance for receivables is kept in a separate account and is not posted to individual customer accounts, so it does not appear in the control account. Irrecoverable debts written off, cash received and sales returns all reduce the amounts owed by individual customers and are credited to the control account.
Question 3
The following information relates to a business's receivables for the year: opening balance $28,400; credit sales $196,500; cash sales $12,000; cash received from credit customers $181,300; sales returns $4,700; irrecoverable debts written off $2,100; contra with the payables ledger control account $1,600; increase in allowance for receivables $900. What is the closing balance on the receivables ledger control account?
- A) $34,300
- B) $35,200
- C) $36,800
- D) $47,200
Show answer & explanation
Answer: B) $35,200
Debits: opening $28,400 + credit sales $196,500 = $224,900. Credits: cash received $181,300 + returns $4,700 + irrecoverable debts $2,100 + contra $1,600 = $189,700. Closing balance = $224,900 - $189,700 = $35,200. Cash sales never pass through receivables, and the allowance is kept in a separate account.
Question 4
A payables ledger control account had an opening credit balance of $19,700. During the year credit purchases were $143,200, payments to suppliers $137,900, purchase returns $3,100, and a contra of $1,600 was made with the receivables ledger control account. What is the closing balance?
- A) $23,500 credit
- B) $26,500 credit
- C) $21,900 credit
- D) $20,300 credit
Show answer & explanation
Answer: D) $20,300 credit
Credits: opening $19,700 + credit purchases $143,200 = $162,900. Debits: payments $137,900 + returns $3,100 + contra $1,600 = $142,600. Closing credit balance = $162,900 - $142,600 = $20,300.
Question 5
A receivables ledger control account shows a balance of $31,450, but the list of individual customer balances totals $30,980. Investigation reveals: (1) a customer's debit balance of $345 was left off the list; (2) a customer's credit balance of $120 was included in the list as a debit balance; (3) the sales day book was overcast by $365. What is the corrected receivables balance?
- A) $31,085
- B) $31,205
- C) $31,450
- D) $31,565
Show answer & explanation
Answer: A) $31,085
List: $30,980 + omitted balance $345 - (2 x $120) to turn a debit of $120 into a credit of $120 = $31,085. Control account: $31,450 - overcast $365 = $31,085. Both now agree at $31,085.
Question 6
A business both buys from and sells to another company. It agrees to set off the amount owed to it by that company against the amount it owes to that company. What is the entry in the control accounts?
- A) Debit Receivables ledger control, Credit Payables ledger control
- B) Debit Payables ledger control, Credit Bank
- C) Debit Payables ledger control, Credit Receivables ledger control
- D) Debit Bank, Credit Receivables ledger control
Show answer & explanation
Answer: C) Debit Payables ledger control, Credit Receivables ledger control
A contra reduces both the amount owed to the supplier (debit payables) and the amount owed by the customer (credit receivables) by the amount set off. No cash changes hands.
Question 7
Which of the following errors would cause a difference between the balance on the payables ledger control account and the total of the list of supplier balances?
- A) An invoice for $3,240 was correctly entered in the purchase day book but posted to the supplier's account as $2,340
- B) An invoice was omitted from the purchase day book entirely
- C) An invoice was posted to the account of the wrong supplier
- D) An invoice was entered in the purchase day book at the wrong amount
Show answer & explanation
Answer: A) An invoice for $3,240 was correctly entered in the purchase day book but posted to the supplier's account as $2,340
The control account takes the correct day book total, but the supplier's individual account is understated by $900, so the two totals disagree. An omitted invoice or one recorded at the wrong amount in the day book affects both records equally. Posting to the wrong supplier leaves the total of the list unchanged.
Question 8
How might a credit balance arise on an individual customer's account in the receivables ledger?
- A) The customer has bought goods on credit and not yet paid
- B) The customer has paid more than the amount owed, or returned goods after paying for them
- C) An irrecoverable debt has been written off
- D) The business has issued a sales invoice to the customer
Show answer & explanation
Answer: B) The customer has paid more than the amount owed, or returned goods after paying for them
A customer account normally has a debit balance. A credit balance means the business owes the customer money, typically because of an overpayment or a credit note issued after payment. A credit sale increases the debit balance, and a write-off reduces it to nil.
Question 9
A business decides to write off a customer's balance as irrecoverable. What is the double entry?
- A) Debit Receivables ledger control, Credit Irrecoverable debts expense
- B) Debit Allowance for receivables, Credit Sales
- C) Debit Irrecoverable debts expense, Credit Receivables ledger control
- D) Debit Sales, Credit Bank
Show answer & explanation
Answer: C) Debit Irrecoverable debts expense, Credit Receivables ledger control
The debt is no longer an asset, so receivables is credited and the loss is charged to profit or loss as an irrecoverable debts expense. The customer's individual account is also credited.
Question 10
The receivables ledger control account agrees with the total of the list of customer balances. Which of the following is true?
- A) The receivables ledger must be free from errors
- B) The trial balance must also agree
- C) No irrecoverable debts can exist
- D) There may still be errors, such as a receipt posted to the wrong customer's account
Show answer & explanation
Answer: D) There may still be errors, such as a receipt posted to the wrong customer's account
Agreement does not prove that the ledger is correct. Errors that affect both records equally, or that only move amounts between individual customer accounts, are not revealed by the reconciliation.