Rajesh kumar was unable to reconcile his trial balance on 31 march 2008 and has opened a suspense accoumt from the difference. later on the following errors were discovered:
1. there were 3 compensating errors:-
a)the total of sales return book was overcast by rs. 100
b) the total of one page of purchase book was carried forward as 1286 instead of 1826.
c)goods purchasedfrom C for rs 400 was debited to his account as rs. 40
2. rs.425 paid for wages to workmen for making office table were debited to wages account.
3. rent paid rs 1500 were posted to credit of rent account as rs150
4. cash received from ghanshyam rs 500 was correctly recorded in cash book but were posted to his account as rs 50
5. rs 720 paid to kamal has been debited to kamlesh a/c as 520
6. the total of purchase return book 2500 was left unposted.
pass rectifying entries and prepare suspense a/c.
Good attempt by all the students, though slightly missed the target. This is because the first part (1) of the question is about the compensatory errors. Such errors do not affect the Trial Balance, therefore, Suspense Account is not used to rectify these errors. The correct solution is given below.
Rectifying Journal Entries
To Sales Return A/c
(Sales Return Book overcasted, wrong carried forward of Purchase Book and goods purchased from C wrongly debited to his account,now rectified)
To Wages A/c
(Wages paid for office table wrongly treated as revenue expenditure, now rectified by capitalising it)
To Suspense A/c
(Rent paid of Rs 1,500 wrongly credited to Rent Account as Rs 150, now rectified)
(Cash received of Rs 500 from Ghanshyam posted as Rs 50, now rectified)
To Suspense A/c
(Cash paid to Kamal of Rs 720 was wrongly debited to Kamlesh Account with Rs 520, now rectified)
To Purchase Return A/c
(Purchase Return undercasted by Rs 2,500)
Difference in Trial Balance (Balancing Figure)
1a)sales ac dr 100
to suspense ac 100
1b)purchase ac dr 540
to suspense ac 540
1c)purchase ac dr 400
suspense ac dr 40
2)furniture ac dr 425
to wages ac 425
3)rent ac dr 1650
to suspense ac 1650
4)suspense ac dr 450
to ghanshyam ac 450
5)kamal ac dr 720
to kamlesh ac 520
to suspense ac 200
6) no entry will b passd
Part 1 (a)
It means that Sales Return Book has been wrongly totalled Rs. 100 in excess. However, the individual entries are assumed to be correctly made. The mistake is made in adding the amounts.
We already know the periodic total of Sales Return Book is posted to the Sales Return A/c (i.e., debited, here) at the end of the period concerned. So, the Sales Returns A/c has been debited by Rs. 100 more than what should have been.
To rectify this pass the following journal entry:
Suspense A/c Dr. 100
To Sales Returns A/c 100