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Accounting Process - Rectification of Errors (Old & New) Notes


The trial balance of Mr. W & H failed to agree and the difference Rs.20,570 was put into suspense pending investigation which disclosed that:

(i) Purchase returns day book had been correctly entered and totalled at Rs.6,160, but had been posted to the ledger.

(ii) Discounts received Rs.1,320 had been debited to discounts allowed.

(iii) The Sales account had been under added by Rs.10,000.

(iv) A credit sale of Rs.1,470 had been debited to a customer account at Rs.1,740.

(v) A vehicle bought originally for Rs.7,000 four years ago and depreciated to Rs.1,200 had not been sold for Rs.1,500 in the beginning of the year but no entries, other than in the bank account had been passed through the books.

(vi) An accrual of Rs.560 for telephone charges had been completely omitted.

(vii) A bad debt of Rs.1,560 had not been written off  and provision for doubtful debts should have been maintained at 10% of Trade receivables which are shown in the trial balance at Rs.23,390 with a credit provision for bad debts at Rs.2,320.

(viii) Tools bought for Rs.1,200 had been inadvertently debited to purchases.

(ix)   The proprietor had withdrawn, for personal use, goods worth Rs.1,960. No entries had been made in the books


(i) Pass rectification entries without narration to correct the above errors before preparing annual accounts.

(ii) Prepare a statement showing effect of rectification on the reported net profit before correction of these errors.

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On going through the Trial balance of Ball Bearings Co. Ltd. you find that the debit is in excess by Rs.150. This was credited to  Suspense Account .On a close scrutiny of the books the following mistakes were noticed

(1) The totals of debit side of  Expenses Account  have been cast in excess by Rs.50.

(2) The  Sales Account  has been totalled in short by Rs.100

(3) One item of purchase of Rs.25 has been posted from the day book ledger as Rs. 250.

(4) The sale return of Rs.100 from a party has not been posted to that account though the Party s account has been credited

(5) A cheque of Rs.500 issued to the Suppliers  account (shown under Trade payables) towards his dues has been wrongly debited to the purchases

(6) A credit sale of Rs.50 has been credited to the sales and also to the trade receivable account.

You are required to  

(i) Pass necessary journal entries for correcting the above

(ii) Show how they affect the Profits; and

(iii) Prepare the  Suspense Account  as it would appear in the ledger

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Q3. Mr. A closed his books of account on September 30,2016 in spite of a difference in the trial balance. The difference was Rs.830 the credits being short; itcarried forward in a suspense Account. In 2017 following  errors were located:
(i)   A sale of Rs.2,300 to Mr.Lala was posted to the credit of Mrs. Mala.
(ii) The total of the returns inward book for july,2016 Rs.1,240 was not posted in the ledger.
(iii) Freight paid on a machine Rs.5,600 was posted to the Freight account Rs.6,500.
(iv) While carrying forward the total in the purchases account to the next page, Rs.65,590 was written instead of Rs. 56,950.
(v)  A sale of machine on credit to Mr. Mehta for Rs.9,000 on 30th sept.2016 was not entered in the books at all. The book value of the machine was Rs.6,750.
Pass Journal entries to rectify the errors. Have you any comments o make?

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Q4. A merchant’s trial balance as on 30th  june ,2017 Did not agree. The difference was to put to a Suspense Account. During the next trading period the following errors were discovered:
(i)    The total of the purchases book of one page, Rs. 4,539 was carried forward to the next page as Rs.4,593.
A sale of Rs.573 was entered in the sales book as Rs.753 and posted to the credit of the customer.
A return to a creditor, Rs.510 was entered in the returns inward book; however, the creditor’s account was correctly  posted.
Cash received from C. Dass, Rs.620 was posted to the debit of G.Dass.
Goods worth Rs.840 were dispatched to a customer before the close of the year but no invoice was made out.
Goods worth Rs. 1,000 were sent on sale or return basis to a customer and entered in the sales book. At the close of the year, the customer still had the option to return the goods. The sale price was 25% above cost. You are required to give journal entries to rectify the errors in a way so as to show the current year’s profit or loss correctly

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      [Errors affecting accounts located before the preparation of trial balance]

       Pass necessary journal entries to rectify the following errors.

   1)    Sales return book was overcast by Rs.500.

   2)    Factory lighting bill Rs.9,000 paid but recorded twice in the books.

   3)    Paid rent Rs.725 was wrongly posted to rent account as Rs.275.

   4)    Total of Sales Book was undercast by Rs.850.

   5)    Wages paid for extension of building Rs.8,900 was charged to wages account.

   6)    Cash received from Moni was recorded on the payment side of cash book Rs.1,800.

   7)    Paid carriage for purchase of Machinery Rs.3,100 was charged to carriage account.

   8)    Life Insurance premium of proprietor paid Rs.1,650.

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