Question

    An invoice of £ 3,700 was debited to purrchases but the goods were received after year - end and were not included in the closing inventory.                                              
1)                                                  
                                                  
2)   Store equipment costing £ 8,100 and having a book value of £ 3,600 was sold for £ 2,500. Cash was debited and store equipment was credited. No other entries were made.                                              
                                                  
                                                  
3)   A cheque of £ 1,850 received from a customer was dishonoured on June 25,2017 but no entry was made in the books. Cash there against was received after year - end.                                              
                                                  
                                                  
4)   Purchase of office equipment costing £ 15,200 was entered in the purchases account. Depreciation on office equipment is provided at the rate of 10%.                                              
                                                  

Rectification and original entry

Answer 1

	1)	Original Entry
				Dr	Cr
		Purchases A/c		£    3,700.00
			To Cash A/c		£    3,700.00
		Rectification Entry
		No Entry required.
	Rationale	Since purhcases have been made at closing period and stock not received, purchase expense would be recognised and closing Inventory would be adjusted for stocks not received.
	2)	Original Entry
				Dr	Cr
		Cash A/c		£    2,500.00
			To Store Equipment Asset A/c		£    2,500.00
		Rectification Entry
		Loss on sale of Asset A/c		£    1,100.00
			To Store Equipment Asset A/c		£    1,100.00
	Rationale	Loss on sale of asset has to be recorded.
	3)	Original Entry
				Dr	Cr
		No entry passed
		Rectification Entry
		Debtor A/c		£    1,850.00
			To Bank A/c		£    1,850.00
	Rationale	Debtor would be created against dishonour and bank balance adjusted.
	4)	Original Entry
				Dr	Cr
		Purchase A/c		£ 15,200.00
			To Bank A/c		£ 15,200.00
		Rectification Entry
		Office Equipment Asset A/c		£ 15,200.00
			To Purchases A/c		£ 15,200.00
		Depreciation A/c		£    1,520.00
			To Office Equipment Asset A/c		£    1,520.00
	Rationale	Purchases reclassified to asset and depreciation charged.