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Rectification of Errors 21.25
(d) Profit & Loss Adjustment A/c ...Dr. 2,040
Customer’s A/c ...Dr. 12,060
To Suspense A/c 14,100
(Being a sale of ` 5,010 wrongly entered in the Sales Book as ` 7,050
and posted to the credit of the customer, now corrected)
Note: Last year’s profit was increased by ` 2,040 because of excess of
sale of ` 2,040 (i.e., ` 7,050 – ` 5,010), so Profit & Loss Adjustment
Account has been debited with ` 2,040. Customer’s Account has
been debited with ` 12,060 (i.e., ` 7,050 + ` 5,010) because Customer’s
Account was credited with ` 7,050 instead of being debited
with ` 5,010.
(e) Stock A/c ...Dr. 10,000
Profit & Loss Adjustment A/c ...Dr. 1,500
To Customer’s A/c 11,500
(Being goods costing ` 10,000 sent to a customer on sale or return
basis wrongly treated as actual sales for ` 11,500, now rectified)
(f) Unexpired Insurance A/c ...Dr. 2,500
To Profit & Loss Adjustment A/c 2,500
(Being unexpired insurance not recorded, now recorded. Last year’s
profit was understated by ` 2,500 because of the higher amount of
insurance, so Profit & Loss Account has been credited)
(g) Building A/c ...Dr. 50,000
To Profit & Loss Adjustment A/c 50,000
(Being amount spent on extension of building wrongly debited to
Repairs Account, now corrected)
(h) M. Roy ...Dr. 10,000
N. Roy ...Dr. 10,000
To Suspense A/c 20,000
(Being cash paid to M. Roy wrongly credited to N. Roy instead of being
debited to M. Roy, now corrected)
Profit & Loss Adjustment A/c (Note) ...Dr. 24,060
To Capital A/c 24,060
(Being profit due to rectification of all errors—balance of Profit &
Loss Adjustment Account—transferred to Capital Account)
Note:
Dr. PROFIT & LOSS ADJUSTMENT ACCOUNT Cr.
Particulars ` Particulars `
To Outstanding Wages A/c 25,000 By Suspense A/c 100
To Suspense A/c 2,040 By Unexpired Insurance A/c 2,500
To Customer’s A/c 1,500 By Building A/c 50,000
To Capital A/c (Balancing Figure) 24,060
52,600 52,600
Illustration 18.
Balaji tallied his Trial Balance placing the difference in the Suspense Account. But, he finds the
following mistakes and needs your help in correcting Trial Balance. With the data given below
you are asked to prepare:
(a) Profit & Loss Adjustment Account for the year ended 31st March, 2022.