Question

5. During the current month, the following errors occurred in recording transactions in the purchases journal or in posting from it:

1. An invoice for $1,875 of supplies from Kelly Co. was recorded as having been received from Kelley Co., another supplier.

2. A credit of $420 to Blackstone Company was posted as $240 in the subsidiary ledger.

3. An invoice for equipment of $4,800 was recorded as $4,000.

4. The Accounts Payable column of the purchases journal was overstated by $3,600.

    How will each error come to the bookkeeper's attention, other than by chance discovery?

Answer 1

Solution :

a. This error come to bookkeeper attention when "Kelly Co." follow for payment then book keeper will see amount outstanding in ledger, as he will not find any amount outstanding then he will review the transaction and posting, then identify the error.

b. This error will be discovered when blackstone ask for payments or when trial balance is prepared as it will not match because debit side will exceed the credit side.

c. Error for equipment purchase will be discovered when vendor ask for payment and if vendor account show balance of $4,000 then vendor will ask for payment of $4,800 and then error will be discovered.

d. This error will be discovered when trial balance was prepared or GL/SL reconciliation was done by bookkeeper.