Study the following and answer the questions below. The trial balance of Mary Harris (Gowns) as at 31 December 20X8 showed a difference which was
33.6 Study the following and answer the questions below. The trial balance of Mary Harris (Gowns) as at 31 December 20X8 showed a difference which was
posted to a suspense account. Draft final accounts for the year ended 31 December 20X8 were pre- pared showing a net profit of £47,240. The following errors were subsequently discovered:
l Sales of £450 to C Thomas had been debited to Thomasson Manufacturing Ltd. l
A payment of £275 for telephone charges had been entered on the debit side of the Telephone account as £375. l The sales journal had been undercast by £2,000. l Repairs to a machine, amounting to £390, had been charged to Machinery account. l
A cheque for £1,500, being rent received from Atlas Ltd, had only been entered in the cash book. l Purchases from P Brooks, amounting to £765, had been received on 31 December 20X8 and included in the closing stock at that date, but the invoice had not been entered in the purchases
journal.
Questions:
(a) (i) Give the journal entries, without narratives, necessary to correct the above errors. (ii) Show the effect of each of these adjustments on the net profit in the draft accounts and the correct profit for the year ended 31 December 20X8. (b) (i) State briefly the purpose of the journal, giving a suitable example of its use. (ii) State why it is necessary to distinguish between capital and revenue expenditure.
(Midland Examining Group: GCSE ) 33.7A Gail Dawson is the owner of a retail business. She has employed an inexperienced book-
keeper to maintain her accounting records. (a) On 31 March 20X9, the end of the business’s accounting year, the bookkeeper extracted the
following trial balance from the business’s records:
Trial Balance at 31 March 20X9
Dr Cr
£ Fixed assets at cost
18,300 Provision for depreciation of fixed assets, 1 April 20X8
Stocks 1 April 20X8
3,700 31 March 20X9
2,960 Trade debtors
1,825 Trade creditors
864 Balance at bank (overdrawn)
18,327 Running expenses
6,904 Provision for doubtful debts
90 Suspense
Part 4 l Adjustments for financial statements
Required:
1 A corrected version of Gail Dawson’s trial balance dated 31 March 20X9 based on the above information, but with an amended figure for the suspense account.
(b) The following errors were found in the accounting system after a corrected version of the trial balance above was prepared.
(i) The total of the sales day book for December 20X8 had been overstated by £120. (ii) In January 20X9 some new office equipment had been purchased for £360; this had been
debited to the purchases account. (iii) A payment by cheque to a creditor, £216, had been entered in the books as £261. (iv) A credit note for £37 sent to a customer had been overlooked. (v) The owner had withdrawn a cheque for £80 for private use in October 20X8; both the
bank and drawings account had been credited with this amount.
Required:
In the books of Gail Dawson 2 Journal entries to correct each of these errors. (Note: narratives are NOT required.) 3 The suspense account. (Start with the amount in the corrected trial balance given in answer to Required 1 above, and include any entries arising from the correction of the errors.) 4 An explanation of the term ‘error of commission’. (Give an example of such an error to illus- trate your answer.)
(Southern Examining Group: GCSE )