The accountant of X prepared the Trial Balance for the year ended 31st March, 2016. But there was a difference and the accountant put the differenc...

Question

The accountant of X prepared the Trial Balance for the year ended 31st March, 2016. But there was a difference and the accountant put the difference in Suspense Account. Rectify the following errors found and prepare the Suspense Account: (1) The total of the· Returns outward book, Rs. 420 has not been posted in the ledger. (2) Purchase of Rs. 350 from Y has been entered in the sales book. However, Y's A/c has been correctly entered. (3) A sale of Rs. 390 to Z has been credited to his account as Rs.290. (4) Old furniture sold for Rs. 5,400 had been entered as Rs. 4,500 in sales account. (5) Goods taken by proprietor Rs. 500 have not been entered in the books at all.

Accepted Answer

Answer Solution: Effect already given Correct Entry Rectification Entry 1 Party A/c Dr. 420 Party A/c Dr. To Purchase Return A/c 420 420 Suspense A/c Dr. To Purchase Return A/c 420 420 2 To Sales A/c To Y A/c 350 350 Purchase A/c Dr. To Y A/c 350 350 Sales A/c Dr. Purchase A/c Dr. To Suspense A/c 350 350 700 3 To Z A/c To Sales A/c 290 390 Z A/c Dr. To Sale A/c 390 390 Z A/c (290+390) To Suspense A/c 680 680 4 Cash A/c Dr. To Sales A/c 5400 4500 Cash A/c Dr. To old furniture A/c 5400 5400 Suspense A/c Dr. Sales A/c Dr. To old furniture A/c 900 4500 5400 5 No effect Drawing A/c Dr. To Goods used A/c 500 500 Drawing A/c Dr. To Goods used A/c 500 500 Suspense Account To Diff. in Trial balance (Balancing figure) 60 By Sundry A/c 700 To Purchase Return A/c 420 By Z A/c 680 To Old Furniture A/c 900 1380 1380 Comment:  Debit side of Trial balance was short by Rs.60.  (5) is double sided error, hence their rectification does not involve suspense A/c but (1), (2), (3) & (4) are one sided error, hence their rectification involves suspense A/ c.  (4) is Error of Principle as well as Error of commission, (5) is Errors of Full omission, (1) is Errors of Partial omission and (2), & (3) are Error of commission.

Detailed Solution & Explanation

About This Chapter: Accounting Process

Key Concepts to Understand

Trial Balance

Ledger

Suspense Account

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