• 1 Marks

FA – May 2016 – L1 – SA – Q7 – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

A question regarding the journal entry required to correct an error in the recording of a non-current asset purchase.

A company purchased a non-current asset for N4,500,000. The company’s accountant recorded the transaction in the company’s books by debiting the purchases account. Raise the journal entry to correct the error.
A. Dr. Purchases Account, Cr. Cash
B. Dr. Non-Current Assets Account, Cr. Cash
C. Dr. Purchases Account, Cr. Non-Current Assets Account
D. Dr. Non-Current Account, Cr. Purchases Account
E. Dr. Non-Current Register Account, Cr. Non-Current Asset Account

Answer:
D. Dr. Non-Current Account, Cr. Purchases Account

Explanation:
The error involves recording the acquisition of a non-current asset as a purchase. The correct journal entry should debit the Non-Current Assets Account and credit the Purchases Account to reverse the incorrect entry.
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