Question

On extracting a trial balance, the accountant of Extra Consult discovered a suspense account with a debit balance of $1,075 included therein; she also found that the debits exceeded the credits by $957. She posted this difference to the suspense account and then investigated the situation. She discovered:

1. (1) A debit balance of $75 on the postage account had been incorrectly extracted on the list of balances as $750 debit.

2. (2) A payment of $500 to a credit supplier, X, had been correctly entered in the cash book, but no entry had been made in the supplier’s account.

3. (3) When a motor vehicle had been purchased during the year the bookkeeper did not know what to do with the debit entry so he made the entry Dr Suspense, Cr Bank $1,575.

4. (4) A credit balance of $81 in the sundry income account had been incorrectly extracted on the list of balances as a debit balance.

5. (5) A receipt of $5 from a credit customer, Y, had been correctly posted to his account but had been entered in the cash book as $625.

6. (6) The bookkeeper was not able to deal with the receipt of $500 from the proprietor’s own bank account, and he made the entry Dr Bank and Cr Suspense.

7. (7) No entry has been made for a cheque of $120 received from a credit customer M.

8. (8) A receipt of $50 from a credit customer, N, had been entered into his account as $5 and into the cash book as $5.

   REQUIRED

   (a) Prepare the Journal entries to correct the above errors. (Narratives are required)

   (b) Prepare the Suspense Account.

Answer 1

		Debit	Credit
1.	suspense	675
	postage		675
	[ To record correction of overstated postage account]
2.	accounts payable	500
	suspense		500
	[ To record correction of debit to wrong account]
3.	Motor vehicles(equipment)	1575
	suspense		1575
	[ To record correction of wrong debit]
4.	Suspense	162
	sundry income		162
	[ To record correction of wrong entry to suspense and sundry income]
5.	suspense	620
	cash		620
	[ To record correction of overstated cash account]
6.	suspense	500
	capital		500
	[ To record correction of entry to wrong account]
7.	bank	120
	accounts receivables (M)		120
	[ To record entry which was omitted]
8	cash	45
	accounts receivables (N)		45
	[ To record correction of understatement of both account]

sl no		amount	sl no		amount
	balance	1075		trial balance difference	957
1.	postage	675	2	accounts payable	500
4	sundry income	162	3	motor vehicles	1575
5	cash	620
6	capital	500
		3032			3032