THE TRIAL BALANCE AND THE CORRECTION OF ERRORS

CHAPTER 22 THE TRIAL BALANCE AND THE CORRECTION OF ERRORS Question 1 Error Type of error 1 An invoice received from a supplier for $657 was recorded in the purchases day book as being for $567 Error of original entry 2 A sales return for $89 from a trade receivable, S McNee, was credited to the account of S McKoy Error of commission 3 Cash sales of $820 were recorded in the accounts as Dr Cash Compensating error $820 Cr Sales $800. The total of the travel expenses analysis column in the petty cash book was mistotalled at $30 rather than the correct figure of $50 4 A cheque counterfoil for rent $680 was entirely overlooked Error of omission 5 The purchase of some new office equipment, $2 300, was debited Error of principle to the purchases account 6 The entries made for the payment of a trade payable, L Mohammed, by cheque $320 were: Dr Bank $320, Cr L Mohammed $320 Error of complete reversal Question 2 (identifying errors not revealed by a trial balance) Error Type of error 1 A till roll showed that cash sales had totalled $2 320. The entries in the accounts were Dr Cash $2 230 and Cr Sales $2 230 Error of original entry 2 A petty cash voucher for stationery $18 was mislaid Error of omission 3 Discounts allowed of $28 were debited to the trade receivable account and credited to the discounts allowed account Error of complete reversal 4 The payment of interest $110 was debited to the insurance account Error of commission 5 The payment of vehicle running costs, $80, had been debited to Error of principle the motor vehicles account 6 The sales returns journal was mistotalled at $170 instead of $160. Rent received from a tenant of $380 had been entered in the rent received account as $390 Compensating error

Question 3 1 Purchases 90 Trade payable 90 To correct amount recorded for a purchases invoice 2 Trade receivable: S McKoy 89 Trade receivable: S McNee 89 To correct sales returns posted to the wrong account 3 Travel expenses 20 Sales 20 To correct errors in posting cash sales and posting travel expenses 4 Rent 680 Bank 680 To correct omission of entries for the payment of rent 5 Office equipment 2 300 Purchases 2 300 To correct the incorrect posting of the purchase of office equipment 6 Trade payable: L Mohammed 640 Bank 640 To correct the reversal of entries made for the payment of a credit supplier

Question 4 1 Cash 90 Sales 90 To correct the amount recorded for cash sales 2 Stationery 18 Petty cash 18 To correct the omission of the payment of stationery 3 Discounts allowed 56 Trade receivables 56 To correct the incorrect entries made for discounts allowed 4 Interest 110 Insurance 110 To correct the misposting of the payment of interest 5 Vehicle running costs 80 Motor vehicles 80 To correct the misposting of the payment of vehicle running costs 6 Rent received 10 Sales returns 10 To correct the mistotalling of sales returns and the incorrect posting of rent received Question 5 1 Suspense 400 Sales 400 Correction of misposted sales 2 Purchases 700 Suspense 700 Correction of failure to post total of purchases journal 3 Suspense 1 700 Rent received 1 700 Correction of failure to post rent received

Sales 400 Balance 1 400 Rent received 1 700 Purchases 700 Question 6 2 100 2 100 1 Suspense 720 Discounts received 720 Correction of failure to post total discounts received 2 Sales returns 90 Suspense 90 Correction of undercast sales returns 3 Wages 230 Suspense 230 Correction of misposted wages Discounts received 720 Balance 860 Wages 230 Sales returns 90 Question 7 950 950 1 Trade receivable 270 Suspense 270 Correction of misposted receipt 2 Postage 70 Suspense 70 Correction of failure to post petty cash total 3 Suspense 380 Purchases returns 380 Correction of undercast purchases returns Purchases returns 380 Balance (difference) 40 Trade receivable 270 Postage 70 380 380

Question 8 1 Sales 410 Suspense 410 Correction of overcast sales journal 2 Rent 730 Suspense 730 Correction of failure to post rent payment 3 Discounts allowed 10 Suspense 10 Correction of misposted discounts Balance (difference) 1 150 Sales 410 Rent 730 Discounts allowed 10 1 150 1 150

Question 9 (a) Errors not affecting agreement of trial balance totals: 1, 4, 6 Errors affecting agreement of trial balance totals: 2, 3, 5 (b) 1 Joseph Wright 370 Joshua Wright 370 Correction of error of misposting of sales returns 2 Suspense 830 T Patel 830 Correction of failure to post receipt from trade receivable 3 General expenses 40 Suspense 40 Correction of failure to post petty cash expenditure 4 Bank 90 JK Samson 90 Correction of incorrect amount recorded for the payment of a supplier 5 Suspense 680 Purchases returns 680 Correction of failure to post purchases returns total 6 Insurance 700 Bank 700 To correct the reversal of entries made for the payment of insurance (c) T Patel 830 Balance (difference) 1 470 Purchases returns 680 General expenses 40 1 510 1 510

Question 10 (a) Errors revealed by the trial balance: 1, 2, 4, 5 Errors not revealed by the trial balance: 3, 6 (b) 1 Discounts received 300 Suspense 300 Correction of posting of overcast discounts received column 2 Trade receivable: Steven Taylor 830 Suspense 830 Correction of entry not posted from sales day book 3 Stationery 40 Cash 40 Correction of error of omission of payment for stationery 4 Suspense 270 Sales returns 270 Correction of misposted total from sales returns journal 5 Water charges 340 Suspense 340 Correction of entry not posted from cash book 6 Cash 1 380 Sales 1 380 Correction of reversal of entries for cash sales (c) Difference in TB 1 200 Discounts received 300 Sakes returns 270 Steven Taylor 830 Water charges 340 1 470 1 470

Question 11 Sharon Lee Correction of Draft Profit for the year ended 30 November 2014 Increases Decreases Draft 89 500 1 Correction of omission of depreciation (3 000) 2 Correction of understated purchases (400) 3 Correction of misbalanced loan account no effect no effect 4 Correction of omission of wages accrual (450) 5 Correction of wrongly recorded carriage no effect no effect 6 Correction of incorrectly treated rent (9 400) 7 Correction of omission of returns inwards (3 280) Totals (16 530) Corrected 72 970 Question 12 Zero Stores Correction of Draft Profit for the year ended 30 September 2014 Increases Decreases Draft 132 850 1 Correction of omission of general expenses (2 140) 2 Correction of understated depreciation (3 700) 3 Correction of overstated sales (710) 4 Correction of misbalanced trade receivable no effect no effect 5 Correction of wrongly treated discounts no effect no effect 6 Correction of rent accrual omitted (630) (630) 7 Correction of overstated returns outwards (300) (300) Totals (7 480) Corrected 125 370 $ $

Question 13 Statement of Financial Position at 31 December 2014 $ Cost Accumulated Net Depreciation Non-current assets 470 000 110 000 360 000 Current assets Inventories 31 000 Trade receivables 18 000 Other receivables 4 000 Cash at bank 7 000 60 000 420 000 Capital Opening balance 362 000 Add 65 000 427 000 Less drawings (26 000) 401 000 less Current liabilities Trade payables 16 000 Other payables 3 000 19 000 420 000 Note: has been recalculated as follows: draft $53 000 add back depreciation error $10 000, add back prepaid expenses $4 000, deduct reduction in the value of inventory $2 000 = $65 000.

Question 14 Statement of Financial Position at 31 July 2014 $ Cost Accumulated Net Depreciation Non-current assets 145 000 57 000 88 000 Current assets Inventories 16 000 Trade receivables 18 000 Prepayments 2 000 36 000 124 000 Capital Opening balance 137 000 Less loss (8 000) 129 000 Less drawings (20 000) 109 000 less Current liabilities Trade payables 11 000 Other payables 1 000 Bank overdraft 3 000 15 000 124 000 Note: the draft has been recalculated as follows: draft $24 000 less depreciation omitted $29 000, less accrual omitted $1 000, less bad debt $2 000 = a loss of $8 000. EXAM-STYLE QUESTIONS Q Ans Q Ans Q Ans Q Ans Q Ans 15 D 16 B 17 D 18 B 19 D 20 D 21 B 22 D

Question 23 (a) Drawings 120 Cash 120 Correction of omission of cash drawings Insurance 830 Suspense 830 Correction of omission of entry for payment of insurance Purchases 600 Suspense 600 Correction of crediting of purchases to the purchases account (b) Difference in TB 1 430 Insurance 830 Purchases 600 1 430 1 430 (c) Morag Correction of Draft Profit for the year ended 31 October 2014 Increases Decreases Draft 16 380 1 Correction of omission of insurance (830) 2 Correction of understated purchases (600) Totals (1 430) Corrected 14 950 $