Control Accounts and Ledger Balances

Steps:

• Sales ledger tracks customer receivables with normal debit balances.
• Purchases ledger tracks supplier payables with normal credit balances.
• Control accounts reconcile subsidiary ledgers and detect errors.
• Irrecoverable debts reduce the sales ledger control account balance.

Why B is correct:

• Receivables are debit balances in the sales ledger (assets owed to the business); credit balances represent customer overpayments, which are liabilities, not receivables.

Why the others are wrong:

• A: Control accounts compare totals to subsidiary ledgers, revealing errors.
• C: Debit balances in the purchases ledger indicate overpayments to suppliers, treated as current assets (prepayments or refunds due).
• D: Irrecoverable debts are written off, directly impacting the sales ledger control account.

Final answer: B