Page 232 - ISCDEBK-XI

21.20 Double Entry Book Keeping—ISC XI
Illustration 14.
Trial Balance of P.K. Traders as at 31st March, 2022 did not match. In order to close the books,
the accountant placed the difference to the newly opened Suspense Account and carried forward
this difference to the next period for necessary adjustments. Later, the following errors arising
in 2021–22 were identified:
(a) A purchase of ` 1,620 was recorded in the Day Book as ` 620 and posted to debit side of
Supplier’s Account as ` 260.
(b) Sales Day Book was overcast by ` 1,000 in January, 2022.
(c) Furniture purchased for ` 25,000 cash was posted to the Purchases Account in the Ledger.
(d) Credit sale of ` 970 was posted to the credit of the Customer’s Account as ` 790.
(e) ` 500 allowed as cash discount to a trade debtor was not debited to the Discount Allowed Account.
Pass the necessary Journal entries to rectify these errors and show Suspense Account,
Profit & Loss Adjustment Account and state the ultimate effect of these correcting entries in
the books for 2021–22.
Solution: In the Books of M/s. P.K. Traders
RECTIFYING JOURNAL ENTRIES
Date Particulars L.F. Dr. (`) Cr. (`)
2022
April 1 Profit & Loss Adjustment A/c (` 1,620 – ` 620) ...Dr. 1,000
(a) Suspense A/c (` 260 + ` 620) ...Dr. 880
To Supplier’s A/c 1,880
(Being purchase of ` 1,620 entered in the Purchase Book as ` 620 but
posted to the debit of Supplier’s A/c as ` 260, now rectified)
(b) Profit & Loss Adjustment A/c ...Dr. 1,000
To Suspense A/c 1,000
(Being Sales Day Book overcast by ` 1,000, now rectified)
(c) Furniture A/c ...Dr. 25,000
To Profit & Loss Adjustment A/c 25,000
(Being furniture purchased has been posted to the Purchases Account,
now rectified)
(d) Customer’s A/c (` 970 + ` 790) ...Dr. 1,760
To Suspense A/c 1,760
(Being credit sale of ` 970 wrongly posted to the credit of Customer’s
Account, as ` 790, now rectified)
(e) Profit & Loss Adjustment A/c ...Dr. 500
To Suspense A/c 500
(Being discount allowed not posted to Discount Allowed Account,
now rectified)
(f) Profit & Loss Adjustment A/c ...Dr. 22,500
To Capital A/c 22,500
(Being the net adjusted profit transferred to Capital Account)
Dr. SUSPENSE ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d (Balancing Figure) 2,380 By Profit & Loss Adjustment A/c 1,000
To Supplier’s A/c 880 By Customer’s A/c 1,760
By Profit & Loss Adjustment A/c 500
3,260 3,260