M/s. Applied Laboratories were unable to agree the Trial Balance as on 31st March, 2020 and have raised a suspense account for the difference. Next...

Question

M/s. Applied Laboratories were unable to agree the Trial Balance as on 31st March, 2020 and have raised a suspense account for the difference. Next year the following errors were discovered: (i) Repairs made during, the year were wrongly debited to the building A/c- 12,500. (ii) The addition of the 'Freight' column in the purchase journal was short by 1,500. (iii) Goods to the value of ₹ 1,050 returned by a customer, Rani & Co., had been posted to the debit of Rani & Co. and also to sales returns. (iv) Sundry items of furniture sold for ₹30,000 had been entered in the sales book, the total of which had been posted to sales account. (v) A bill of exchange (received from Raja & Co.) for 20,000 had been returned by the bank as dishonored and had been credited to the bank and debited to bills receivable account. You are required to pass journal entries to rectify the above mistakes. [Nov. 2020, 5 Marks]; [MTP Jan. 2025; Modified]

Accepted Answer

Answer Solution: In the books of M/s, Applied Laboratories Rectification Journal Entries S. No. Particulars Debit Credit 1 Profit & Loss Adjustment A/ c Dr. To Building A/ c (Being repairs debited to building account, now rectified) 12,500 - - 12,500 2 Profit & Loss Adjustment A/ c Dr. To Suspense A/ c (Being under casting of 1,500 in freight column, rectified) 1,500 - - 1,500 3 Suspense Dr. To Rani & Co. (Being Rani's Account debited instead of crediting, now rectified) 2,100 - - 2,100 4 Profit & Loss Adjustment A/ c Dr. 30,000 - To Furniture A/ c (Being sale of furniture credited to sales account, now rectified) - 30,000 5 Raj & Co. A/c Dr. To Bills receivables A/ c (Being dishonour of bill wrongly debited to Bills receivable account, now rectified) 20,000 - - 20,000 Capital A/c (W.N.) Dr. To Profit & Loss Adjustment A/c (Being Balance of Profit & Loss Adjustment A/ c transferred to Capital account) 44,000 - - 44,000 Working Note: Profit & Loss Adjustment A/ c Particulars Amount Particulars Amount To Building A/ c 12,500 By Capital A/ c (Bal. fig.) (Loss on adjustment) 44,000 To Suspense A/ c 1,500 To Furniture A/ c 30,000 Total 44,0000 Total 44,000

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Trial Balance

Suspense Account

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