User:Aman Kewate/sandbox

Study Material, a project of ILM Community Set # 02 - Rectification of Errors Question # 01 Write out the general entries to rectify the following errors using a Suspense Account: a) The total of “Discount Allowed” from the Cash Book for the month of December, 2008 amounting to Rs.350 was not posted. b) An amount of Rs.175 entered in the Sales Return Book has been posted to the debit of Mr. Roberts who returned the goods. c) Bad debts aggregating Rs.250 were written off during the year in the Sales Ledger but were not adjusted in the General Ledger. d) Goods of the value of Rs.500 returned by Mr. Smith were entered in the Sale Day Book and posted there from to the credit of his account. e) A sales of Rs.800 made to Mr. Peter was correctly entered in the Sales Day Book but wrongly posted to the debit of Mr. Armstrong as Rs.80. Question # 02 In 2008, Mr. Parvez found that his books for the year 2007 contained some errors in spite of an agreed Trial Balance. The errors were: a) An invoice for Rs.50 for goods purchased from Mr. Bashir was entered in Sales Returns Book; in the ledger, this was debited to the account of Mr. Bashar. b) Goods bought on credit from Mr. Kamran for Rs.150 were entered in the Sales Book as Rs.105. Mr.Kamran’s account was credited with amount of Rs.105. c) The Sales Book for the month of April 2007 was overcast by Rs.150. d) A sale of Rs.257 to Mr.Danish was entered in the Sales Book as Rs.527. Mr. Danish was debited with Rs.752. e) Rs.79 paid for freight on machinery was debited to Freight Account as Rs.97 Give journal entries to rectify the errors using a suspense account where necessary. Question # 03 Pass journal entries to rectify the following errors: a) A cheque of Rs.750 received fro loss of stock by fire had been deposited in the proprietor’s Private Bank account. b) An item of purchase of Rs.151 was entered in the Purchase Book as Rs.15 and posted to the supplier’s A/c as Rs.51 c) A sale return of Rs.500 was not entered in the financial accounts though it was duly taken in the stock book. d) An amount of Rs.300 was received in full settlement from a customer after he was allowed a discount of Rs.50 but while writing the books, the amount received was entered in the Discount Column and the Discount Allowed was entered in the Cash Column. e) Bill receivable from Mr. Ali of Rs.1,000 was posted to the credit of Bills Payable account and also credited to the A/c of Mr. Ali. Question # 04 State which of the following errors will affect the agreement of the Trial Balance and which will not? Give rectifying journal entries wherever relevant assuming the differences in Trial Balance has been placed to Suspense Account. i) Purchase of second hand motor car for Rs.150,000 has been debited to Motor Car Maintenance Account. ii) A sale of Rs.5,000 to Sarwar has been wrongly entered in the Sales Day Book as Rs.500 iii) An entry in the Purchase Returns Book of Rs.2,000 has been omitted to be posted in the Account of Sabzwar, the supplier. iv) An amount of Rs.2,000 received from Sheeraz has been posted to the credit of Shehzad as Rs.200. v) The total of Sales Day Book for the month of July, Rs.150,000 has been omitted to be posted in the ledger. Question # 05 An accountant could not tally the Trial Balance. The difference was temporarily placed to Suspense Account for preparing the final accounts. The following errors were later discovered: a) The sales book was undercast by Rs.50 b) Entertainment expenses Rs.95, though entered in the Cash book were omitted to be posted in ledger c) Discount column of the receipt side of the cash book was wrongly added as Rs.140 instead of Rs.120. d) Commission of Rs.25 paid, was posted twice, once to discount account and once to commission account. e) A sale of Rs.139 to Rizwan though correctly entered in sales book, was posted wrongly to his account as Rs.193. f) A purchase from Naved of Rs.92 though correctly entered in purchase book, was wrongly debited to his personal account. You are required to: i) Pass the necessary rectifying entries, ii) Prepare Suspense Account, and iii) State the effect of each of the rectification on the Profit. iv) What would be the corrected profit if the profit originally arrived at was Rs.10,000? Question # 06 Messrs Modern Chemical were unable to agree Trial Balance on 30 June,2009 and have raised a Suspense Account for the differences. Later the following errors were discovered and rectified and the Suspense Account was balances. a) Tge addition of the Sundry Purchases column of in the Tabular purchase Journal was short by Rs.150 and other total orders were in order. b) A bill of exchange (received from Ghani) for Rs.2,000 had been returned by they Bank as dishonored and had been credited to the banm and debited the to Bills receivable account. c) Goods of the value of rs.105 returned by the customer, Tariq, had been posted to the debit of Tariq and also to the sales return. d) Sundry items of Furniture sold for Rs.3,000 had been entered in the sales day book, the total of which had been posted to Sales Account. e) An amount of Rs.6000 due from Viki, a customer, had been omitted from the schedule of Sundry Debtors. f) Discounts amounting to Rs.30 allowed to a customer had been duly posted in his account, but not posted to Discount Account. g) Insurance Premium of Rs.450 paid on 30th June, 2008 for the year ended 30th June 2009 had not been brought forward. You are required to: 1) Pass journal entries to rectify the above errors, 2) Draw up the Suspense account after rectifying the above mistakes and explain how the above errors affect the book profits for the year ended 30 June 2009? Question # 07 The under mentioned errors were discovered in the books of Saleem Ahmed after the Profit and Loss account had been prepared for the year ended 31st March 2009. The difference in Trial Balance was carried to Suspense Account in the Balance Sheet. Saleem Ahmed provided depreciation on Machinery at 10% p.a. and on Furniture at 5% p.a. A reserve for bad debt was provided at 2% on outstanding debtors. Net profit for the year was transferred to Capital Account. a) A cheque received for Rs.8,000 from a customer was not posted to ledger. The corresponding sales invoices was for Rs.12,000 which had been wrongly posted through the Sales Day Book as Rs.2,000. b) A machinery purchased for Rs.20,000 on 1st April, 2008 was wrongly debited to Furniture account. c) Sales included Rs.25,000 for goods sold for cash on behalf of Zaigham, Saleem Ahmed was entitled to a commission of 10% on sales plus expenses for which no adjustment was made. His trade expense included Rs.1,500 as selling in connection with the above sale. d) Some old furniture (book value on 1st April 2008 Rs.6000) was disposed of for Rs.3,000 on 30th September 2008 but the proceeds has been wrongly credited to Sales account. e) A credit sale of Rs.5,000 had been passed twice through the Sales Day Book. Contact: ilm.for.all@gmail.com