Accounting Question Test COE No.2 On Correction Of Errors/Suspense Account

Question:

When the trial balance of XYZ Ltd as at 30/9/08 was prepared, a difference was found. A Suspense Account was created in order to achieve the balance:

Examination of the books showed the following:

1.0  Discount allowed of $76 had been credited to the Discount Received Account

2.0  A sale of $151 to Mr. A had been posted correctly to the personal account but entered in the Sales Day Book as $115

3.0  A cheque received from Mr. B entered correctly in the Cash Book as $766 had been posted to the company’s account as $760

4.0  The purchase of new machinery for $1,200 had been posted to the Stock Account. Depreciation is ignored for the year in which the machinery is purchased

5.0  A sale of $265 to Mr. C had not been posted to his account

6.0  A petty cash balance of $100 was omitted from Trial Balance

7.0  Bank interest charges of $720 were correctly entered in the Cash Boo but the other side of the double entry had been omitted.

Required:

(a)  Prepare Journal entries to correct the above errors, without narrations (14 marks)

(b)  Prepare a Suspense Account (7 marks)

(c)  Final accounts, prepared from the original trial balance, show the working capital to be $16,217. Prepare a statement showing the effect of the above correction of this figure ( 4 marks)

[ Refer ANSWER)