- 15 Marks
Question
Your subordinate in POP-Two Ventures, an inexperienced bookkeeper, has informed you that the trial balance failed to agree by a difference of N170,000, recorded on the credit side of a suspense account. After investigating, you discovered the following errors:
| Errors | Amount (N’000) |
|---|---|
| Cash payment debited to the bank cash book | 360 |
| Overcasting of sales | 700 |
| Overcasting of purchases | 700 |
| Returns inwards omitted from the books | 380 |
| Bank charges posted into the cash book without a corresponding entry elsewhere | 370 |
| Opening receivables balance brought down incorrectly | 180 |
| PPE sold, credited to sales account instead of the correct account | 5,000 |
Required:
i. Effect the necessary corrections by means of journal entries (11 Marks)
ii. Prepare the suspense account (4 Marks)
(Total 15 Marks)
Answer
i. Journal Entries
| S/N | Particulars | Debit (N’000) | Credit (N’000) |
|---|---|---|---|
| (i) | Suspense account | 360 | |
| Cash account | 360 | ||
| (ii) | Sales account | 700 | |
| Suspense account | 700 | ||
| (iii) | Suspense account | 700 | |
| Purchases account | 700 | ||
| (iv) | Returns inwards account | 380 | |
| Account receivables | 380 | ||
| (v) | Bank charges account | 370 | |
| Suspense account | 370 | ||
| (vi) | Trade receivables account | 180 | |
| Suspense account | 180 | ||
| (vii) | Sales account | 5,000 | |
| Property, plant, and equipment account | 5,000 | ||
ii. Suspense Account
| Suspense Account | Debit (N’000) | Credit (N’000) |
|---|---|---|
| Cash account | 360 | |
| Sales account | 700 | |
| Purchases account | 700 | |
| Bank charges | 370 | |
| Trade receivables account | 180 | |
| Balance b/f | 170 | |
| 1,420 | 1,420 |
- Tags: Financial Corrections, Journal Entries, Suspense Accounts, Trial Balance Errors
- Level: Level 1
- Topic: Correction of errors
- Series: NOV 2020
- Uploader: Dotse