Adjust control account for omitted sales to find correct trade receivables

Steps:

• Identify the sales ledger control account balance as the basis for trade receivables in the statement of financial position: $19,100.
• Recognize that credit sales omitted from the sales journal understate the control account by $1,600, as the sales journal posts debits to receivables control.
• Add the omitted credit sales to correct the control account: $19,100 +$1,600 = $20,700.
• Note that the understated discount affects only the individual sales ledger balances, not the control account total used in the statement of financial position.

Why D is correct:

• Trade receivables in the statement of financial position equal the adjusted control account balance, per double-entry bookkeeping principles, adding omitted sales postings to receivables control.

Why the others are wrong:

• A. Subtracts omitted sales from control account, overstating the understatement.
• B. Subtracts understated discount from control account, ignoring that it affects subsidiary ledger only.
• C. Adds understated discount to control account, misapplying the subsidiary ledger error.

Final answer: D