 Hello everyone, welcome to the second lesson in our series on control accounts. The objectives of the series are to explain the use and advantages of control accounts in a business, to describe and differentiate between the terms debtors control account and creditors control account and to draw up control accounts from totals in debtors and creditors ledgers. The topic of today's lesson is creditors control account. After watching this video, you should be able to identify different creditors transactions and know how to draw up a creditors control account. Good afternoon. Yes, this is Mr. Freeman speaking. How can I help you? $200 interest. Yes, in three weeks' time. Yes, I understand. Thank you very much. Who was that, mom? Why do you look so worried? That was the lady from 1D Suppliers reminding me about my overdue account. Is this the same lady from when you bought the hair dryer? Yes, the lady told me that they have charged $200 on my overdue account. And they're not the first people to talk about payments. And you have to pay so much money. What are you going to do? I'll just have to pay them. Where I'll get the money from is the question. Anyway, let me just take you home. Oh, is it okay if I give you a tax money? Because I still have to finish this book. Mom, I thought you were going to buy the sneakers on our way home. Okay, fine. But you're going to have to give me a tax money. Here. And keep the change. I want the change when I get home tonight. Can you come over to the salon? I'll do one word. Fair it is. Okay, we'll see you soon. Bye. I'll buy a new one in my house. Tell me, what's wrong? You sounded so worried. I've got a call from my credit suppliers again. Is Mr. Green traveling already? No, it was the other supplier. It is not only Mr. Green who wants his money to be paid as soon as possible. I have two other suppliers, from whom I buy on credit. One is supplier and the other is beauty supplier. And now my account is arrears with both the creditors. Are they suing you? Not yet. They've only sent me warnings. But I've made an arrangement to pay at the end of the month. Yes, but I couldn't pay the full outstanding amount. And now they charge interest. How much interest are they charging you? Two hundred Namibian dollars. That's hash? Yeah, exactly how much money do you owe them? I don't know the exact amount and that is what I need to find out now. Yeah, that's what you need to do. You really need to. Do you have all the documents? Yes, everything and the files. I think I can quickly do some of the transactions with the suppliers from the documents. Let me see. Okay, let's see. How did he mess you up, yeah? Oh, Green Boy sells credit notes and even an account statement. Tell me, did you pay anything after you received the statement? Yes, I have paid five hundred Namibian dollars. But it does not show here on the statement. I have the receipt. But you know it will not because you've met the payment after you received the statement. Okay. So can we do the calculations now? Okay, come down Sarah. To do the calculations, we will have to make a summary of all your transactions with the creditors. Give me the file for the duty salon so that we can work with the creditors. Here. Now, we can do a summary of all your transactions with both creditors by drawing up a creditors control account. And will that show me exactly how much I owe the creditors? That's right. And we will collect the information of the transactions from your documents here. You know what Sarah? In future, you should have a separate account for each of your creditors. And then enter the transaction as it occurs on daily basis. Okay, you mean like I have a card system for each debtor? I should also have a card system for each creditor. That's what you call a creditors ledger. Where you will have your individual creditors account. And then we have the creditors ledger is where you open the individual debtors account. Like you have your customer card. And the creditors control account is the summary of all your creditors transactions. Oh Paula. Do you always have to be so complicated? But it's okay. I understand what you say. Okay. Let's start with the documents. You can identify the different transactions while we sort these documents. You can work with our disfi and I will take good supply. But you only have a receipt and an account statement in this file. Yes. I did not buy anything from them during this month. I first have to pay my account before they will give me things on credit again. Okay. You also have an account statement in my disfi. What is the balance statement? Okay. Let me check quickly. $5,673 and five cents. Okay. Let me put you on discount. The balance of five suppliers is $5,672 and $1,000. And the balance of two British suppliers is $7,145 and $83. So in total. You owe them $12,818 and $8. So that is a lot of money. Okay. Let's identify the transactions. What do you have on the English way? This one is for the curlers and work brushes that I have bought on the 10th of the month. And then I have bought three sets of hair clippers on the 15th. And then there's also a credit note for the hot brushes that I have returned because it didn't work well. That's all except for the receipt for the $500 payment that I have made at the end of the month. Okay. So when you bought hair dryers, brushes and hair clippers and so on, why did I? Was it for you to use in the salon or to sell to other salon? Well, sometimes I bought for use in the salon, but this I bought to sell to my customers. Okay. When you buy goods, you say it is a credit purchase transaction. When you return goods, it's called purchases with things. When you pay your account, it's called credit payment transaction. When the credit that charge you over your account with your interest, it's called interest payment. All right. Now, that is a form of credit transactions. The credit purchases, the purchases returned, the credit payments, interest charge that over your account. Now, you can drop the creditors' control account. Okay. Let's start. The creditors' control account has two sides. The debit side and the credit side. With credit, the creditors' account is the amount only increases. And debit the control account when the amount only decreases. It is also helpful to remember that the creditors' account, the creditors' control account is the liability account. It therefore increases on the credit side and decreases on the debit side. What do you think? I think so. Okay. And yes, we have calculated the creditors' balance at the end of last month. Yes. The balance will enter on the credit side of the account on the first day of the month. Okay. Next, we have to add the amount of the two invoices. $1875.15 plus $1600.00, giving total purchases of $3475.15. You enter it on the credit side because your account increases. Remember, this is purchases. Next, we enter the information on the credit side. Purchasers will tend to worth $330.00. This entry is made on the debit side. Because purchases will tend to decrease your account. I think that's all. No, no, no, no, no. There is still the receipt showing the payment of $500.00 that I have made on the sticks. I think we should enter it on the debit side because my account decreases. Let's go ahead slowly. Unfortunately, we haven't received the new account statements to see how much we have charged for the interest. That's true, but the lady from 1D Supply has said they will charge you $200.00 for interest. Let's enter the $200.00 for interest then. Okay. And then you can balance the account to give us the amount that you owe to your creditors. Okay. Do you know how to balance the account? Yes. Let me do it. Okay. Okay. We add the amount on each side and write it on a scrap paper. Right. Let's see. On the debit side, we have $330.00 plus $500.00, which gives us $830.00. Right. The credit side total is then $12,818.00 in 88 cents. Plus $3,475.50 plus $200.00, which gives us $16,494.03. Then the biggest amount of the two, which is $16,494.03, is then ended in total columns on both sides. The difference between the two columns, $16,494.03 minus $830.00, gives us $15,664.03, which is then the balance of the account. That's good. See how quick that is? Yes. But you know how it goes when you get busy. I think you deserve a cool drink. Wait, Sarah. Okay. What? I will be okay. Okay. I don't know how to apply for credit. But you must really pay for this account. Yes, I know. Because if you give your account up to date, the creditors might offer you a discount on your payments. That's true. You know, they did that at first, but now they just add interest. Okay. Let's take a look at the creditors' transactions, which identify from the document credit purchases of dates. Mm-hmm. Purchases retail. Mm-hmm. Purchase statement. Interest charged on overdue account. Okay. Now, we can add two more transactions for us. When you pay your account on time, and the creditors offer you a discount, it's called discount receipt. Oh, yes. And then I have to end the discount receipt on the debit side to decrease the amount. You're right. Okay. You're definitely right. But just thinking this. Hmm. I don't think you need more explanation. Thank you so much, Paula. Mm-hmm. I think I'll be able to bring my account up to date at the end of the month. Yeah. Many of my clients have promised to pay their standing bills at the end of the month. All right. And I've also learned Vanessa needs to buy so much on credit. Much pleasure, Gauke. Come. Let's go to the coffee shop. Thank you. Okay. Let's get out of here. Mm-hmm. Let's summarize what we've learned today. Creditors refer to suppliers to whom the business owes money. Contractors of creditors transactions include credit purchases transactions, purchases returns transactions, creditors payments and discount receive transactions, and interest charge on overdue accounts. The creditors control account is drawn up to give a summary of all creditors transactions for the month. This brings us to the end of our series on control accounts. Goodbye and happy learning.