Mr. Mathur's trial balance as on 31st March, 2024 did not agree. The difference was put to a Suspense Account. During the next trading period, the…

CA Foundation · Accounting · RTP · May 2025
Mr. Mathur's trial balance as on 31st March, 2024 did not agree. The difference was put to a Suspense Account. During the next trading period, the following errors were discovered: (i) The total of the Purchases Book of one page, 7,165 was carried forward to the next page as 7,615. (ii) A sale of 281was entered in the Sales Book as 821 and posted to the credit of the customer. (iii) A return to creditor, 1,595 was entered in the Returns Inward Book; however, the creditor's account was correctly posted. (iv) A cheque of 500issued to a suppliers A/c (shown under trade payables) towards his dues has been wrongly debited to purchases. (v) Goods worth - 1,400 were dispatched to a customer before the close of the year but no invoice was made out. (vi) Goods worth - 1,600 were sent on sale or return basis to a customer and entered in the Sales Book at the close of the year, the customer still had the option to return the goods. The gross profit margin was 20% on sale. (viii) Sale of goods to Mr. R for 3,000 was omitted to be recorded. You are required to give journal entries to rectify the errors in a way so as to show the current year's profit or loss correctly .

Suggested Answer and Working Notes:

Journal Entries in the books of Mr. Mathur Particulars L.F. Dr. ₹ Cr. ₹ (i) Suspense A/c Dr. 450 To Profit and Loss Adjustment A/c 450 (Correction of error by which Purchase Account was over debited last year -7,615 carried forward instead of 7,165) (ii) Profit & Loss Adjustment A/c Dr. 540 Customer’s A/c Dr. 1,102 To Suspense A/c 1,642 (Correction of the entry by which (a) Sales A/c was over credited by - 540 (b) customer was credited by 821instead of being debited by - 281) (iii) Suspense A/c Dr. 3,190 To Profit & Loss Adjustment A/c 3,190 (Correction of error by which Returns Inward Account was debited by - 1,595 instead of Returns Outwards Account being credited by - 1,595) (iv) Trade payables A/c Dr. 500 To Purchases A/c 500 (Being payments made to a supplier wrongly credited to purchases now rectified) (v) Customer’s (debtors) A/c Dr. 1,400 To Profit & Loss Adjustment A/c 1,400 (Rectification of the error arising from non-preparation of invoice for goods delivered) (vi) Profit & Loss Adjustment A/c Dr. 1,600 To Customer’s A/c 1,600 (The Customer’s A/c credited with goods not yet purchased by him) (vii) Inventory A/c Dr. 1,280 To Profit & Loss Adjustment A/c 1,280 (Cost of goods debited to inventory and credited to Profit & Loss Adjustment A/c) (viii) R’s A/c/Trade receivable A/c Dr. 3,000 To Profit & Loss Adjustment A/c 3,000 (Sales to R omitted, now rectified) (ix) Profit & Loss Adjustment A/c Dr. 7,180 To Mathur’s Capital A/c 7,180 (Transfer of the Profit & Loss Adjustment A/c balance to the Capital Account)

Topics: Rectification of Errors

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