Neco 2019 Financial Accounting Question 8

The following summary information relates to XYZ Ltd’s trade receivables and trade payables for the year ended 31 December 2024. **Sales Ledger Control (SLC)** - Opening balance (debit) – ₦500,000 - Credit sales to customers – ₦2,400,000 - Cash received from customers – ₦1,800,000 - Sales returns recorded in subsidiary ledgers – ₦120,000 - Trade discounts allowed – ₦60,000 - Bad debts written off – ₦30,000 - Closing balance shown in the ledger – ₦890,000 **Purchases Ledger Control (PLC)** - Opening balance (credit) – ₦300,000 - Credit purchases – ₦1,800,000 - Cash payments to suppliers – ₦1,500,000 - Purchase returns recorded in subsidiary ledgers – ₦90,000 - Trade discounts received – ₦45,000 - Outstanding payments at year‑end (as per PLC) – ₦210,000 Using the above data, answer the following: a) Prepare the Sales Ledger Control Account showing the correct closing balance. b) Prepare the Purchases Ledger Control Account showing the correct closing balance. c) Determine net credit sales, net credit purchases and compute the gross profit for the year. d) Explain the purpose of control accounts in the accounting system and state two advantages of maintaining them.