Question Tag: sales account

The trial balance drawn up for the year ended 31 December 2016 for AB Ltd failed to agree with a difference of GH¢7,200. The difference was credited to the suspense account pending investigations.

During 2017 the following errors were identified:

• GH¢10,000 received from the sale of old machinery has been entered in the sales account.
• The purchase day book has been overstated by GH¢16,000.
• Goods taken by the owner for personal use GH¢12,000 have not been recorded.
• Bank charges of GH¢4,800 have not been entered in the cash book.
• A discount allowed of GH¢4,500 has been debited to discount received account.
• The figure for wages in the trial balance, GH¢40,000, has been entered as GH¢4,000.
• A cheque payment of GH¢24,000 for stationery has been debited to the purchase account.

Required:

• Prepare the necessary journal entries to correct the errors above. (8 marks)
• Draw up the suspense account after correcting the errors. (3 marks)
• Prepare the corrected profit or loss account for AB Ltd for the year ended 31 December 2016. (3 marks)

b) The cash book of Lexis Limited as at 31 December 2016 discloses a balance of GH¢18,450
which did not agree with the bank statement balance. Investigation revealed the following:
 Cheques received of GH¢52,000, GH¢5,000 and GH¢12,450 were still in the business drawer.
 GH¢1,200 and GH¢1,800 standing orders for the payment of Electricity charges and Insurance
respectively were paid by the bank but this has not been recorded in the cash book of Lexis
Limited.
 The bank charged GH¢150 for a cheque book issued to Lexis Ltd.
 The bank has wrongly debited a cheque of GH¢4,955 into Lexis Ltd account which should
have been placed in another customers account.
 A credit transfer of GH¢5,000 had been made in favour of Lexis Ltd. The transfer has not been
recorded in the cash book.
 A cheque of GH¢70,000 drawn by Lexis limited was correctly entered in the cash book but
debited to the bank statement as GH¢7,000
 The following cheques which were paid in November 2016 had not been presented :
GH¢
00001142: 2,000
00001168: 5,000
00001190: 4,655

Required:
Prepare
i) The adjusted cash book
ii) A statement to reconcile the balance in (i) above to the bank statement balance