Page 236 - ISCDEBK-XI

21.24 Double Entry Book Keeping—ISC XI
Dr. PROFIT & LOSS ADJUSTMENT ACCOUNT Cr.
Particulars ` Particulars `
To Office Car A/c 7,500 By Printer A/c 5,000
By Capital A/c (Balancing Figure) 2,500
7,500 7,500
Illustration 17.
On preparing a Trial Balance on 31st March, 2022, Ashish observed that the credit balances
exceeded debit balances and he transferred this difference to Suspense Account to tally the
Trial Balance. Following errors were subsequently identified:
(a) ` 7,200 owing by a customer had been omitted from the schedule of sundry debtors.
(b) The total of the Returns Inward Book was added ` 100 more.
(c) Wages outstanding ` 25,000 had not been taken into account.
(d) A sale of ` 5,010 had been entered in the Sales Book as ` 7,050 and posted to the credit of
the customer.
(e) Goods costing ` 10,000 were went to a customer on sale or return basis for ` 11,500.
These had been recorded in the books as actual sales but no information regarding their
acceptance by the customer was received up to 31st March, 2022.
(f) Unexpired insurance ` 2,500 has not been taken into account while preparing
Profit & Loss Account for the year 2021–22.
(g) On 20th March, 2022 a sum of ` 50,000 spent on extension of building had been wrongly
debited to Repairs to Building Account.
(h) Cash ` 10,000 paid to M. Roy was credited to the account of N. Roy.
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.
Solution: RECTIFYING JOURNAL ENTRIES

Date Particulars L.F. Dr. (`) Cr. (`)
(a) Sundry Debtors A/c ...Dr. 7,200
To Suspense A/c 7,200
(Being the omission of a balance of a customer from the schedule of
a sundry debtors, now added. It is a trial balance error, so it does not
affect an account)
(b) Suspense A/c ...Dr. 100
To Profit & Loss Adjustment A/c 100
(Being overcasting of the Returns Inward Book, now rectified.
Last year’s profit was decreased by ` 100 because of the excess
returns inwards, so Profit & Loss Adjustment Account has
been credited)
(c) Profit & Loss Adjustment A/c ...Dr. 25,000
To Outstanding Wages A/c 25,000
(Being outstanding wages not recorded, now recorded. Last year’s
profit was overstated by ` 25,000 because of not recording of
outstanding wages, so Profit & Loss Adjustment Account has
been given debit)