QUESTION:Mr. A extracted a Trial Balance at 31 st December 2005 and found that it did not balance. He posted the difference to a Suspense Account. Later he found the following errors which accounted for the difference:
- The total of $3,650 for Discount Allowed for the month of July’05 had been posted to the credit side of Discount Received Account.
- A payment of $ 2,100 to Mr A from a debtor Mr XY had been posted to the credit of Mr TEY in error.
- Mr A had paid $ 2,640 wages and supplied materials costing $960 to his own employees in building a store at the rear of his factory. No adjustment had been made.
- A payment of $560 for Postage had been posted to that account as $650
- Mr A bought new fitting for his factory costing $1,800 but this transaction had been posted to the Purchases Account
- A payment by Mr A of $960 for an electricity bill had been entered in the Cash Book but the double entry had not been made.
Required:
(a) Prepare the journal entries necessary to correct the errors and omission (19 marks)
(b) Prepare the Suspense Account showing the original difference in the Trial Balance ( 6 marks )
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ANSWER(a) Mr. A’s Journal Entries
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Item No
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Date
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Particulars
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Dr($)
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Cr($)
|
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1
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Dec 31
|
Discount Received A/c |
365
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|
|
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Discount Allowed A/c |
365
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|
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Suspense A/c |
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|
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Being correction of Discount Allowed $365 wrongly credited to Discount Received Account |
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2
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Dec 31
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Mr TEY Account |
2,100
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|
|
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Mr XY Account |
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2,100
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Being correction of payments $2,100 by Mr XY wrongly credited to Mr TEY account |
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3
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Dec 31
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Drawings Account |
3,600
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|
|
|
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Wages Accoount |
|
2,640
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|
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Purchases Account |
|
960
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Being correction of error on Wages paid $2,640 and material used $960 for own store) |
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3
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Dec 31
|
Drawings Account |
3,600
|
|
|
|
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Wages Accoount |
|
2,640
|
|
|
|
Purchases Account |
|
960
|
|
|
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Being correction of error on Wages paid $2,640 and material used $960 for own store) |
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3
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Dec 31
|
Drawings Account |
3,600
|
|
|
|
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Wages Accoount |
|
2,640
|
|
|
|
Purchases Account |
|
960
|
|
|
|
Being correction of error on Wages paid $2,640 and material used $960 for own store) |
|
|
|
|
|
|
|
|
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3
|
Dec 31
|
Drawings Account |
3,600
|
|
|
|
|
Wages Accoount |
|
2,640
|
|
|
|
Purchases Account |
|
960
|
|
|
|
Being correction of error on Wages paid $2,640 and material used $960 for own store) |
|
|
|
|
|
|
|
|
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3
|
Dec 31
|
Drawings Account |
3,600
|
|
|
|
|
Wages Accoount |
|
2,640
|
|
|
|
Purchases Account |
|
960
|
|
|
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Being correction of error on Wages paid $2,640 and material used $960 for own store) |
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(b) Suspense Account
| Date |
|
$
|
Date |
|
$
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| Dec 31 |
Difference as per Trial Balance |
817
|
Dec 31 |
Discount allowed |
365
|
| |
Postage |
9
|
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Discount received |
365
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| |
|
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Electricity |
96
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| |
|
826
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826
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