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Question-1

State the meaning of a trial balance?

Solution:
A trial balance is a statement showing the summary of balances of all accounts in the ledger. Trial balance is an important statement in the accounting process. It shows final position of all accounts and helps in preparing the final statements.

Question-2

Give two examples of errors of principle?

Solution:
Purchase of assets appearing in the purchase book and repair on assets purchased posted to the respective asset account.

Question-3

Give two examples of errors of commission?

Solution:
Error of recording i.e., Goods worth Rs. 1000 purchased from Gupta traders entered as Rs. 100. This error will not affect the trial balance. Another example is wrong totaling where an error might be committed while totaling the subsidiary books. For example, if the total is Rs. 10,500 and by mistake if the amount is recorded as Rs.10,550 it is an error of totaling.

Question-4

What are the methods of preparing trial balance?

Solution:
A trial balance can be prepared in the following three methods:

(i) Totals Method

(ii) Balances Method

(iii) Totals-cum-balances Method

Question-5

What are the steps taken by an accountant to locate the errors in the trial balance?

Solution:
Verify the totals of debit and credit columns of the trial balance.
Compare the account head/title and amount appearing in the trial balance, with that of the ledger to detect any difference in amount or omission of an account.
Compare the trial balance of current year with that of the previous year to check additions and deletions of any accounts and also verify if there is a large difference.
Re-checks the correctness of balances of individual accounts in the ledger.
Re-check the correctness of the posting in accounts from the books of original entry.
If the difference between the debit and credit columns is divisible by 2, there is a possibility that an amount equal to one-half of the difference may have been posted to the wrong side of another ledger account. For example, if the total of the debit column of the trial balance exceeds by Rs. 1,500, it is quite possible that a credit item of Rs.750 may have been wrongly posted in the ledger as a debit item. To locate such errors, the accountant should scan all the debit entries of an amount of Rs. 750.
The difference indicates a complete omission of a posting. For example, the difference of Rs. 1,500 given above may be due to omissions of a posting of that amount on the credit side. Thus, the accountant should verify all the credit items with an amount of Rs. 1,500.
If the difference is a multiple of 9 or divisible by 9, the mistake could be due to transposition of figures. For example, if a debit amount of Rs. 459 is posted as Rs. 954, the debit total in the trial balance will exceed the credit side by Rs. 495 (i.e. 954 – 459 = 495). This difference is divisible by 9. A mistake due to wrong posting of the decimal point may also be checked by this method. Thus, a difference in trial balance divisible by 9 helps in checking the errors for a transposed mistake.

Question-6

What is a suspense account? Is it necessary that is suspense account will balance off after rectification of the errors detected by the accountant? If not, then what happens to the balance still remaining in suspense account?

Solution:
To avoid delay in preparation of financial statements, the amount of difference of the trial balance is temporarily put in an account called "Suspense Account" so as to tally the trial balance by putting the difference on the shorter side.

Question-7

What kinds of errors would cause difference in the trial balance. Also list examples that would not be revealed by a trial balance?

Solution:
An error in the books of original entry if discovered before posting to the ledger, may be corrected by crossing out the wrong amount by a single line and writing the correct amount above the struck off amount and putting the initial at the place. Examples of such errors are error of casting; error of carrying forward; error of balancing; error of posting to correct account but with wrong amount; error of posting to the correct account but on the wrong side; posting to the wrong side with the wrong amount; omitting to show an account in the trial balance.

Question-8

Describe the purpose for the preparation of trial balance.

Solution:
The trial balance is prepared to fulfill the following objectives:

1. To check the arithmetical accuracy of the ledger accounts.

2. To help in locating errors; and

3. To help in the preparation of the financial statements.

Ascertain the Arithmetical Accuracy of Ledger Accounts
The trial balance is prepared to check whether all debits and credit are properly recorded in the ledger or not and that all accounts have been correctly balanced. When the totals of all the debit balances and credit balances in the trial balance are equal, it is assumed that the posting and balancing of accounts is arithmetically correct. However, the tallying of the trial balance is not a conclusive proof of the accuracy of the accounts. It only ensures that all debits and the corresponding credits have been properly recorded in the ledger.

Help in Locating Errors
When a trial balance does not tally, the accountant knows that an error has occurred.

The error (or errors) may have occurred at one of those stages in the accounting process:

(1) Totaling of subsidiary books,

(2) Posting of journal entries in the ledger,

(3) Calculating account balances,

(4) Carrying account balances to the trial balance, and

(5) Totaling the trial balance columns.

It may be noted that the accounting accuracy is not ensured even if the totals of debit and credit balances are equal because some errors do not affect equality of debits and credits.

For example, the book-keeper may debit a correct amount in the wrong account while making the journal entry or in posting a journal entry to the ledger. This error would cause two accounts to have incorrect balances but the trial balance would tally. Another error is to record an equal debit and credit of an incorrect amount. This error would give the two accounts incorrect balances but would not create unequal debits and credits. As a result, the fact that the trial balance has tallied does not imply that all entries in the books of original record have been recorded and posted correctly. However, equal totals do suggest that several types of errors probably have not occurred.

Help in the Preparation of the Financial Statements
Trial balance is considered as the connecting link between accounting records and the preparation of financial statements. Since the balances of all accounts appear in the trial balance, it provides a basis for the preparation of the financial statements. In fact, the availability of a tallied trial balance is the first step in the preparation of financial statements. All revenue and expense accounts appearing in the trial balance are transferred to the trading and profit and loss account and all liabilities, capital and assets accounts are transferred to the balance sheet.

Question-9

Explain errors of principle and give two examples with measures to rectify them.

Solution:
Errors of Principle
Accounting entries are recorded as per the generally accepted accounting principles. The errors resulting from the violation of the accounting principles are known as errors of principle. This error may occur due to incorrect classification of expenditure or receipt between capital and revenue. This is very important because it will have an impact on financial statements. It may lead to under/over stating of income or assets or liabilities, etc.
For example, amount spent on additions to the buildings should be treated as capital expenditure and must be debited to the asset account. Instead, if this amount is debited to maintenance and repairs account, it has been treated as a revenue expense. This is an error of principle.
Similarly, if a credit purchase of machinery is recorded in purchases book instead of journal proper or rent paid to the landlord is recorded in the cash book as payment to landlord, these errors of principle. These errors do not affect the trial balance.

Question-10

Explain the errors of commission and give two examples with measures to rectify them.

Solution:
Errors of Commission
The errors which are committed due to wrong posting of transactions, wrong totaling or balancing of the accounts, wrong casting of the subsidiary books, or wrong recording of amount in the books of original entry, etc. are called errors of commission.

For example: Radha Hans Traders paid Rs. 25,000 to Preethi Traders (a supplier of goods). This transaction was correctly recorded in the cashbook. But while posting to the ledger, Preethi’s account was debited with Rs. 2,500 only. This constitutes an error of commission. Such an error is of clerical nature and most of the errors of commission affect in the trial balance.

Question-11

What are the different types of errors that are usually committed in recording business transaction.

Solution:
Errors of Commission
The errors which are committed due to wrong posting of transactions, wrong totaling or balancing of the accounts, wrong casting of the subsidiary books, or wrong recording of amount in the books of original entry, etc. are called errors of commission.

For example: Radha Hans Traders paid Rs. 25,000 to Preethi Traders (a supplier of goods). This transaction was correctly recorded in the cashbook. But while posting to the ledger, Preethi’s account was debited with Rs. 2,500 only. This constitutes an error of commission. Such an error is of clerical nature and most of the errors of commission affect in the trial balance.

Errors of Omission
The errors of omission are the errors done at the time of recording the transaction in the books of original entry or while posting to the ledger.
This can be of two types:

(i) Error of complete omission

(ii) Error of partial omission
When a transaction is completely omitted from recording in the books of original record, it is an error of complete omission. For example, credit sales to Mohan Rs. 10,000, not entered in the sales book. While the recording of transaction is partly omitted from the books, it is an error of partial omission.

If in the above example, credit sales had been duly recorded in the sales book but the posting from sales book to Mohan’s account has not been made, it would be an error of partial omission.

Errors of Principle
Accounting entries are recorded as per the generally accepted accounting principles. The errors resulting from the violation of the accounting principles are known as errors of principle. This error may occur due to incorrect classification of expenditure or receipt between capital and revenue. This is very important because it will have an impact on financial statements. It may lead to under/over stating of income or assets or liabilities, etc.

For example, amount spent on additions to the buildings should be treated as capital expenditure and must be debited to the asset account. Instead, if this amount is debited to maintenance and repairs account, it has been treated as a revenue expense. This is an error of principle.

Similarly, if a credit purchase of machinery is recorded in purchases book instead of journal proper or rent paid to the landlord is recorded in the cash book as payment to landlord, these errors of principle. These errors do not affect the trial balance.

Compensating Errors
When two or more errors are committed and the net effect of these errors on the debits and credits of accounts is nil, such errors are called compensating errors. Such errors do not affect the tallying of the trial balance.

For example, if purchases book has been overcast by Rs. 10,000 resulting in excess debit of Rs. 10,000 in purchases account and sales returns book is under cast by Rs. 10,000 resulting in short debit to sales returns account is a case of two errors compensating each other’s effect. One plus is set off by the other minus, the net effect of these two errors is nil and so they do not affect the agreement of trial balance.

Question-12

Rectify the following errors :
(i) Credit sales to Mohan Rs. 7,000 were not recorded.
(ii) Credit purchases from Rohan Rs. 9,000 were not recorded.
(iii) Goods returned to Rakesh Rs. 4,000 were not recorded.
(iv) Goods returned from Mahesh Rs. 1,000 were not recorded.

 


Solution:
Rectification Entry

(i) Mohan a/c Dr.                              10,000

    To Suspense                                          10,000

(ii) Suspense a/c Dr.                          9,000

    To Rohan                                                9,000

(iii) Rakesh a/c Dr.                            4,000

    To Suspense                                            4,000

(iv) Suspense a/c Dr.                          1,000

    To Mahesh                                               1,000

Question-13

Rectify the following errors :
(i) Credit sales to Mohan Rs. 7,000 were recorded as Rs.700.
(ii) Credit purchases from Rohan Rs. 9,000 were recorded. as Rs.900.
(iii) Goods returned to Rakesh Rs. 4,000 were recorded as Rs 400.
(iv) Goods returned from Mahesh Rs. 1,000 were recorded as Rs.100.

 


Solution:
(i) Mohan a/c Dr.                          6,300

            To suspense                                   6,300

(ii) Rohan a/c Dr.                            8,100

            To suspense                                    8,100

(iii) Rakesh a/c Dr.                          3,600

            To suspense                                    3,600

(iv) Suspense a/c Dr.                         900

            To Mahesh                                         900

Question-14

Rectify the following errors :
(i) Credit sales to Mohan Rs. 7,000 were recorded as Rs.7,200.
(ii) Credit purchases from Rohan Rs. 9,000 were recorded as Rs. 9,900.
(iii) Goods returned to Rakesh Rs. 4,000 were recorded as Rs 4,040.
(iv) Goods returned from Mahesh Rs. 1,000 were recorded as Rs.1,600.

 


Solution:
(i) Suspense a/c Dr.                  200

         To Mohan                                    200

(ii) suspense a/c Dr.                     900

         To Rohan                                     900

(iii) Rakesh a/c Dr.                        40

         To Suspense                                  40

(iv) Suspense a/c Dr.                    600

         To Mahesh                                   600

Question-15

Rectify the following errors :
(a) Salary paid Rs. 5,000 was debited to employee’s personal account.
(b) Rent Paid Rs. 4,000 was posted to landlord’s personal account.
(c) Goods withdrawn by proprietor for personal use Rs. 1,000 were debited to sundry expenses account.
(d) Cash received from Kohli Rs. 2,000 was posted to Kapur’s account.
(e) Cash paid to Babu Rs. 1,500 was posted to Sabu’s account.

 


Solution:
(a) Salary a/c Dr.  5,000  
         To Employee salary a/c         5,000
(b) Rent a/c Dr. 4,000  
         To Landlord     4,000
(c) Drawings a/c Dr.     1,000  
    Suspense a/c Dr. 1,000  
         To Sundry expenses         1,000
(d) Suspense a/c Dr.  4,000  
         To Kohli   2,000
         To Kapur                   2,000
(e) Babu a/c Dr.    1,500  
     Sabu a/c Dr.         1,500  
         To Cash              3,000

Question-16

Rectify the following errors :
(a) Credit Sales to Mohan Rs. 7,000 were recorded in purchases book.
(b) Credit Purchases from Rohan Rs. 9,00 were recorded in sales book.
(c) Goods returned to Rakesh Rs. 4,000 were recorded in the sales return book.
(d) Goods returned from Mahesh Rs. 1,000 were recorded in purchases return book.

 


Solution:
(a) Suspense a/c Dr. 14,000  
             To Purchases a/c Dr.   7,000
             To Sales        7,000
(b) Purchases a/c Dr.       900  
     Sales a/c Dr.    900  
             To Suspense   1,800
(c) Rakesh a/c Dr. 4,000  
     Sales return a/c Dr. 4,000  
             To Suspense   8,000
(d) Suspense a/c Dr. 2,000  
             To Mahesh        2,000
             To Purchase return     2,000

Question-17

Rectify the following errors :
(a) Sales book overcast by Rs. 700.
(b) Purchases book overcast by Rs. 500.
(c) Sales return book overcast by Rs. 300.
(d) Purchase return book overcast by Rs. 200.

 


Solution:
Suspense a/c Dr.                    700

        To Sales                                700

Purchases a/c Dr.                      500

        To Suspense                          500

Suspense a/c Dr.                      300

        To Sales return                      300

Purchase Return a/c Dr.             200

        To Suspense                         200

Question-18

Rectify the following errors :
(a) Sales book undercast by Rs.300.
(b) Purchases book undercast by Rs.400.
(c) Return Inwards book undercast by Rs.200.
(d) Return outwards book undercast by Rs.100.

 


Solution:
Suspense a/c Dr.                 300

             To Sales                          300

Purchaes a/c Dr.                    400

              To Suspense                   400

Suspense a/c Dr.                   200

              To Sales Return               200

Purchase return a/c Dr.           100

              To Suspense                   100

Question-19

Rectify the following errors and ascertain the amount of difference in trial balance by preparing suspense account :

(a) Credit sales to Mohan Rs. 7,000 were not posted.

(b) Credit purchases from Rohan Rs. 9,000 were not posted.

(c) Goods returned to Rakesh Rs. 4,000 were not posted.

(d) Goods returned from Mahesh Rs. 1,000 were not posted.

(e) Cash paid to Ganesh Rs. 3,000 was not posted.

(f) Cash sales Rs. 2,000 were not posted.


Solution:
(a) Mohan a/c Dr.                         7,000

            To Suspense                             7,000

(b) Suspense a/c Dr.                      9,000

            To Rohan                                  9,000

(c) Rakesh a/c Dr.                         4,000

            To Suspense                             4,000

(d) Suspense a/c Dr.                      1,000

            To Mahesh                                1,000

(e) Ganesh a/c Dr.                         3,000

            To Suspense                             3,000

(f) Suspense a/c Dr.                       2,000

To Sales                                               2,000

Suspense Account

Rohan 9,000 Mohan 7,000
Mahesh 1,000 Rakesh 4,000
Sales 2,000 Ganesh 3,000
Balance c/d 2,000    
  14,000   14,000

 

Question-20

Rectify the following errors and ascertain the amount of difference in trial balance by preparing suspense account :

(a) Credit sales to Mohan Rs. 7,000 were posted as Rs. 9,000.

(b) Credit purchases from Rohan Rs. 9,000 were posted as Rs. 6,000.

(c) Goods returned to Rakesh Rs. 4,000 were posted as Rs. 5,000.

(d) Goods returned from Mahesh Rs. 1,000 were posted as Rs. 3,000.

(e) Cash sales Rs. 2,000 were posted as Rs. 200.


Solution:
(a) Suspense a/c Dr.             2,000

            To Mohan                           2,000

(b)Suspense a/c Dr.                3,000

            To Rohan                           3,000

(c) Rakesh a/c Dr.                  1,000

            To Suspense                       1,000

(d) Suspense a/c Dr.              2,000

            To Mahesh                         2,000

(e) Suspense a/c Dr.              1,800

            To Sales                            1,800

Suspense Account

Mohan 2,000    
Mahesh 2,000 Rakesh 1,000
Rohan 3,000 Balance c/d 7,800
Sales 1,800    
  8,800   8,800

 

Question-21

Rectify the following errors :
(a) Credit sales to Mohan Rs. 7,000 were posted to Karan.
(b) Credit purchases from Rohan Rs. 9,000 were posted to Gobind.
(c) Goods returned to Rakesh Rs. 4,000 were posted to Naresh.
(d) Goods returned from Mahesh Rs. 1,000 were posted to Manish.
(e) Cash sales Rs. 2,000 were posted to commission account.

 


Solution:
(a) Mohan a/c Dr.              7,000

            To Karan a/c Dr.                   7,000

 

(b) Goind a/c Dr.                     9,000

            To Rohan                                9,000

(c) Rakesh a/c Dr.                   4,000

            To Naresh                               4,000

(d) Manish a/c Dr.                    1,000

            To Mahesh                               1,000

(e) Commission a/c Dr.             2,000

            To Sales                                    2,000

Question-22

Rectify the following errors assuming that a suspense account was opened. Ascertain the difference in trial balance.

(a) Credit sales to Mohan Rs. 7,000 were posted to the credit of his account.

(b) Credit purchases from Rohan Rs. 9,000 were posted to the debit of his account as Rs. 6,000.

(c) Goods returned to Rakesh Rs. 4,000 were posted to the credit of his account.

(d) Goods returned from Mahesh Rs. 1,000 were posted to the debit of his account as Rs. 2,000.

(e) Cash sales Rs. 2,000 were posted to the debit of sales account as Rs. 5,000.


Solution:
(a) Mohan a/c Dr.              7,000

            To Suspense                         7,000

(b) Suspense a/c Dr.             3,000

            To Rohan                              3,000

(c) Suspense a/c Dr.             4,000

            To Rakesh                            4,000

(d) Mahesh a/c Dr.                1,000

            To Suspense                         1,000

(e) Suspense a/c Dr.             3,000

            To Sales                                 3,000

Suspense Account

Rohan 3,000 Mohan 7,000
Rakesh 4,000 Mahesh 1,000
Sales 3,000 Balance c/d 2,000
       
  10,000   10,000

 

 

Question-23

Rectify the following errors assuming that a suspense account was opened. Ascertain the difference in trial balance.

(a) Credit sales to Mohan Rs. 7,000 were posted to Karan as Rs. 5,000.

(b) Credit purchases from Rohan Rs. 9,000 were posted to the debit of Gobind as Rs 10,000.

(c) Goods returned to Rakesh Rs. 4,000 were posted to the credit of Naresh as Rs 3,000.

(d) Goods returned from Mahesh Rs. 1,000 were posted to the debit of Manish as Rs. 2,000.

(e) Cash sales Rs. 2,000 were posted to commission account as Rs. 200.


Solution:
(a) Mohan a/c Dr. 7,000  
       Karan a/c Dr.  5,000  
             To Suspense   12,000
(b) Suspense a/c Dr. 19,000  
             To Rohan   9,000
             To Gobind   10,000
(c) Suspense a/c Dr. 7,000  
             To Rakesh   4,000
             To Naresh   3,000
(d) Manish a/c Dr. 2,000  
       Mahesh a/c Dr.  1,000  
             To Suspense   3,000
(e) Commission a/c Dr. 200  
       Suspense a/c Dr.  1,800  
             To Sales   2,000

                   Suspense Account

Rohan 9,000 Mohan 7,000
Gobind 10,000 Karan 5,000
Rakesh 4,000 Manish 2,000
Naresh 3,000 Mahesh 1,000
Sales 1,800 Balance c/d 12,800
  27,800   27,800

 

Question-24

Rectify the following errors assuming that suspense account was opened. Ascertain the difference in trial balance.

(a) Credit sales to Mohan Rs. 7,000 were recorded in Purchase Book. However, Mohan’s account was correctly debited.

(b) Credit purchases from Rohan Rs. 9,000 were recorded in sales book. However, Rohan’s account was correctly credited.

(c) Goods returned to Rakesh Rs. 4,000 were recorded in sales return book. However, Rakesh’s account was correctly debited.

(d) Goods returned from Mahesh Rs. 1,000 were recorded through purchases return book. However, Mahesh’s account was correctly credited.

(e) Goods returned to Naresh Rs. 2,000 were recorded through purchases book. However, Naresh’s account was correctly debited.


Solution:
(a) Suspense a/c Dr. 14,000  
             To Purchases   7,000
             To Sales   7,000
(b) Purchases a/c Dr. 9,000  
       Sales a/c Dr. 9,000  
             To Suspense   18,000
(c) Purchase return a/c Dr. 4,000  
      Sales return a/c Dr. 4,000  
             To Suspense   8,000
(d) Suspense a/c Dr. 2,000  
             To Purchase return   1,000
             To Sales return   1,000
(e) Purchase return a/c Dr. 2,000  
       Purchases a/c Dr. 2,000  
             To Suspense   4,000

           
 Suspense Account

Purchases 9,000 Purchase return 4,000
Sales 9,000 Sales return 4,000
Purchase return 1,000 Balance c/d 20,000
Sales return 1,000    
Purchase return 2,000    
Purchases 2,000    
  24,000   24,000

 

Question-25

Rectify the following errors :
(a) Furniture purchased for Rs. 10,000 wrongly debited to purchases account.
(b) Machinery purchased on credit from Raman for Rs. 20,000 was recorded through purchases book.
(c) Repairs on machinery Rs. 1,400 debited to machinery account.
(d) Repairs on overhauling of secondhand machinery purchased Rs. 2,000 was debited to Repairs account.
(e) Sale of old machinery at book value of Rs. 3,000 was credited to sales account.

 


Solution:
(a) Furniture a/c Dr.                     10,000

               To Purchases                                 10,000

(b) Machinery a/c Dr.                        20,000

               To Raman                                       20,000

(c) Repairs a/c Dr.                             1,400

               To machinery                                 1,400

(d) Machinery a/c Dr.                        2,000

               To Repairs                                      2,000

(e) Sales a/c Dr.                                 3,000

               To machinery                                 3,000

Question-26

Rectify the following errors :
(a) Depreciation provided on machinery Rs. 4,000 was not posted.
(b) Bad debts written off Rs. 5,000 were not posted.
(c) Discount allowed to a debtor Rs. 100 on receiving cash from him was not posted.
(d) Discount allowed to a debtor Rs. 100 on receiving cash from him was not posted to discount account.
(e) Bill receivable for Rs. 2,000 received from a debtor was not posted.

 


Solution:
(a) Suspense a/c Dr.                          4,000

                To machinery                                    4,000

(b) Suspense a/c Dr.                              5,000

                To bad debts written off                 5,000

(c) Suspense a/c Dr.                              100

                To discount allowed                         100

(d) Suspense a/c Dr.                              100

                To discount allowed                         100

(e) Bills receivable a/c Dr.                     2,000

                To Suspense                                      2,000

Question-27

Rectify the following errors :
(a) Depreciation provided on machinery Rs. 4,000 was posted as Rs. 400.
(b) Bad debts written off Rs. 5,000 were posted as Rs. 6,000.
(c) Discount allowed to a debtor Rs. 100 on receiving cash from him was posted as Rs. 60.
(d) Goods withdrawn by proprietor for personal use Rs. 800 were posted as Rs. 300.
(e) Bill receivable for Rs. 2,000 received from a debtor was posted as Rs. 3,000.

 


Solution:
(a) Depreciation a/c Dr.                        3,600

                 To Machinery                                       3,600

(b) Bad debts written off a/c Dr.            1,000

                 To Suspense                                        1,000

(c) Discount aallowed a/c Dr.                   40

                 To Sundry Debtors                              40

(d) Drawings a/c Dr.                                  500

                 To Purchases                                       500

(e) Suspense a/c Dr.                                 1,000

                 To Bills receivable                               1,000

Question-28

Rectify the following errors assuming that suspense account was opened. Ascertain the difference in trial balance.

(a) Depreciation provided on machinery Rs. 4,000 was not posted to Depreciation account.

(b) Bad debts written-off Rs. 5,000 were not posted to Debtors account.

(c) Discount allowed to a debtor Rs. 100 on receiving cash from him was not posted to discount allowed account.

(d) Goods withdrawn by proprietor for personal use Rs. 800 were not posted to Drawings account.

(e) Bill receivable for Rs. 2,000 received from a debtor was not posted to Bills receivable account.


Solution:
(a) Depreciation a/c Dr.                            4,000

                To Suspense                                               4,000

(b) Suspense a/c Dr.                                     5,000

                To bad debts                                               5,000

(c) Suspense a/c Dr.                                      100

                To Discount allowed                                   100

(d) Drawings a/c Dr.                                      800

                To Suspense                                                800

(e) Bills receivable a/c Dr.                             2,000

                To Suspense a/c                                        2,000

Suspense Account

Bad debts 5,000 Depreciation 4,000
Discount allowed 100 Drawings 800
Balance c/d 1,700 Bills receivable 2,000
       

 

Question-29

Trial balance of Anuj did not agree. It showed an excess credit of Rs. 6,000. He put the difference to suspense account. He discovered the following errors.
(a) Cash received from Ravish Rs. 8,000 posted to his account as Rs. 6,000.
(b) Returns inwards book overcast by Rs. 1,000.
(c) Total of sales book Rs. 10,000 was not posted to Sales account.
(d) Credit purchases from Nanak Rs. 7,000 were recorded in sales Book. However, Nanak’s account was correctly credited.
(e) Machinery purchased for Rs. 10,000 was posted to purchases account as Rs. 5,000. Rectify the errors and prepare suspense account.

 


Solution:
(a) Suspense a/c Dr. 2,000  
            To Ravish   2,000
(b) Suspense a/c Dr. 1,000  
            To Sales Return   1,000
(c) Suspense a/c Dr. 10,000  
            To Sales   10,000
(d) Purchases a/c Dr. 7,000  
       Sales a/c Dr.   7,000  
            To Suspense   14,000
(e) Machinery a/c Dr.  10,000  
            To Purchases   5,000
            To Suspense   5,000

Suspense Account

Ravish 2,000 Balance b/d 6,000
Sales Return 1,000 Purchases 7,000
Sales 10,000 Sales 7,000
Machinery 5,000    
Balance c/d 2,000    
  20,000   20,000

 

Question-30

Trial balance of Raju showed an excess debit of Rs. 10,000. He put the difference to suspense account and discovered the following errors :

(a) Depreciation written-off the furniture Rs. 6,000 was not posted to Furniture account.

(b) Credit sales to Rupam Rs. 10,000 were recorded as Rs. 7,000.

(c) Purchases book undercast by Rs. 2,000.

(d) Cash sales to Rana Rs. 5,000 were not posted.

(e) Old Machinery sold for Rs. 7,000 was credited to sales account.

(f) Discount received Rs. 800 from kanan on playing cash to him was not posted. Rectify the errors and prepare suspense account.


Solution:
(a) Suspense a/c Dr.                  6,000

                To Furniture                             6,000

(b) Rupam a/c Dr.                         3,000

                To Suspense                             3,000

(c) Purchases a/c Dr.                    2,000

                To Suspense                             2,000

(d) Suspense a/c Dr.                     5,000

                To Sales                                     5,000

(e) Sales a/c Dr.                            7,000

                To Machinery                            7,000

(f) Kannan a/c Dr.                          800

                To Discount received                  800

Dr.                                            Suspense Account                                        Cr.

Furniture 6,000 Balance c/d 10,000
Sales 5,000 Purchases 2,000
    Rupam 3,000
       
  21,000   21,000

 

Question-31

Trial balance of Madan did not agree and he put the difference to suspense account. He discovered the following errors:
(a) Sales return book overcast by Rs. 800.
(b) Purchases return to Sahu Rs. 2,000 were not posted.
(c) Goods purchased on credit from Narula Rs. 4,000 though taken into stock, but no entry was passed in the books.
(d) Installation charges on new machinery purchased Rs. 500 were debited to sundry expenses account as Rs. 50.
(e) Rent paid for residential accommodation of madam (the proprietor) Rs. 1,400 was debited to Rent account as Rs. 1,000.
Rectify the errors and prepare suspense account to ascertain the difference in trial balance.

 


Solution:
(a) Suspense a/c Dr.                    800

                To Sales return                            800

(b) Suspense a/c Dr.                      2,000

                To Purchase return                   2,000

(c) Purchases a/c Dr.                     4,000

                To Suspense                               4,000

(d) machinery a/c Dr.                      500

                To Sundry expenses                   50

                To Suspense                               450

(e) Rent a/c Dr.                               400

                To Suspense                               400

Dr.                                            Suspense Account                                   Cr.

Sales return 800 machinery 450
Purchase return 2,000 Rent 400
Balance c/d 2050 Purchases 4,000
       
  4,850   4,850
       

 

Question-32

Trial balance of Kohli did not agree and showed an excess debit of Rs. 16,300. He put the difference to a suspense account and discovered the following errors:

(a) Cash received from Rajat Rs. 5,000 was posted to the debit of Kamal as Rs. 6,000.

(b) Salaries paid to an employee Rs. 2,000 were debited to his personal account as Rs. 1200.

(c) Goods withdrawn by proprietor for personal use Rs. 1,000 were credited to sales account as Rs. 1,600.

(d) Depreciation provided on machinery Rs. 3,000 was posted to Machinery account as Rs. 300.

(e) Sale of old car for Rs. 10,000 was credited to sales account as Rs. 6,000. Rectify the errors and prepare suspense account.


Solution:
(a) Suspense a/c Dr. 1,000  
       Rajat a/c Dr. 5,000  
             To Kamal   6,000
(b) Salary a/c Dr. 800  
             To Employee’s personal account   800
(c) Sales a/c Dr. 1,600  
             To Drawings   1,000
             To Suspense   600
(d) Suspense a/c Dr. 2,700  
             To machinery   2,700
(e) Suspense a/c Dr. 4,000  
             To Sales     4,000

Dr.                                           Suspense Account                                        Cr.

Kamal 1,000 Balance b/d 16,300
Machinery 2,700 Sales 1,600
Sales 4,000    
Balance c/d 10,700    
       
  17,900   17,900

 

Question-33

Give journal entries to rectify the following errors assuming that suspense account had been opened.

(a) Goods distributed as free sample Rs. 5,000 were not recorded in the books.

(b) Goods withdrawn for personal use by the proprietor Rs. 2,000 were not recorded in the books.

(c) Bill receivable received from a debtor Rs. 6,000 was not posted to his account.

(d) Total of Returns inwards book Rs. 1,200 was posted to Returns outwards account.

(e) Discount allowed to Reema Rs. 700 on receiving cash from her was recorded in the books as Rs. 70.


Solution:
(a) Suspense a/c Dr. 5,000  
             To Free sample   5,000
(b) Drawings a/c Dr. 2,000  
             To Suspense   2,000
(c) Bills receivable a/c Dr. 6,000  
             To Suspense   6,000
(d) Suspense a/c Dr. 2,400  
             To Sales return   1,200
             To purchase return   1,200
(e) Discount allowed a/c Dr. 630  
             To Suspense   630

Dr.                                             Suspense Account                                       Cr.

Free Sample 5,000 Drawings 2,000
Sales return 1,200 Bills receivable 6,000
Purchase return 1,200 Discount allowed 630
Balance c/d 1,230    
       
  8,630   8,630

 





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