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QUESTION 

Errors

 

At the year end of T Down & Co, an imbalance in the trial balance was revealed which resulted in the 

creation of a suspense account with a credit balance of $1,040. 

Investigations revealed the following errors. 

(i) 

A sale of goods on credit for $1,000 had been omitted from the sales account. 

(ii) 

Delivery and installation costs of $240 on a new item of plant had been recorded in cost of sales. 

(iii) 

Cash discount of $150 on paying a supplier, JW, had been taken, even though the payment was 

made outside the time limit. 

(iv) 

No adjustment had been made for closing inventory of $240.  

(v) 

A purchase of raw materials of $350 had been recorded in the purchases account as $850. 

(vi) 

The purchase returns day book included a sales credit note for $230 which had been entered 

correctly in the account of the customer concerned, but included with purchase returns in the 

nominal ledger. 

Note: Cash/settlement discounts received are deducted from cost of sales. 

Required 

(a) 

Prepare journal entries to correct each of the above errors. Narratives are not required. 

(b) 

Open a suspense account and show the corrections to be made. 

(c) 

Prior to the discovery of the errors, T Down & Co's gross profit was calculated at $35,750 and the 

profit for the year at $18,500. 

 

Calculate the revised gross profit and profit for the year figures after the correction of the errors. 

ANSWER 

(a)  

 

     

Dr 

       

Cr 

 

 

 

      $ 

       $ 

 

(i) 

  

DEBIT Suspense 

a/c 

  

1,000 

 

 

  

CREDIT Sales 

 

  

1,000

 

(ii) 

  

DEBIT Plant 

  

240 

 

 

  

CREDIT Delivery 

cost 

 

  

240

 

(iii) 

  

DEBIT Cash 

discount 

received 

  

150 

 

 

  

CREDIT JW 

a/c 

 

  

150

 

(iv) 

  

DEBIT 

Inventory of stationery 

  

240 

 

 

  

CREDIT Stationery 

expense 

 

  

240

 

(v) 

  

DEBIT Suspense 

a/c 

  

500 

 

 

  

CREDIT Purchases   

 

  

500

 

(vi) 

  

DEBIT Purchase 

returns 

  

230 

 

 

  

DEBIT Sales 

returns 

  

230 

 

 

  

CREDIT Suspense 

a/c 

 

  

460

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