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    john123456AB's Avatar
    john123456AB Posts: 2, Reputation: 1
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    #1

    Nov 7, 2014, 09:46 AM
    Carol operates a manual book-keeping system and prepares accounts to 30 September eac
    Carol operates a manual book-keeping system and prepares accounts to 30 September each year. All of her sales are cash sales but she buys goods from her suppliers on credit terms. She maintains a payables control account and this account forms part of her double-entry system, so that the balance on the control account is included in her trial balance. The personal accounts of individual suppliers are held in the payables ledger as memorandum records only.

    Carol's trial balance at 30 September 2008 showed that credit balances exceeded debit balances by 1,460. On the same date, the credit balance on the payables control account was 7,320 but a list of balances extracted from the payables ledger totalled only 5,494.

    Carol placed the trial balance difference into a suspense account and proceeded to prepare draft accounts for the year to 30 September 2008. The trial balance difference was treated as an expense in these draft accounts, which showed a profit for the year of 18,450. Carol then searched through her accounting records and located the following errors:

    1. A batch of purchase invoices totalling 653 had been omitted from the accounting records entirely.

    2. Bank charges of 12 had been recorded in the cashbook but nowhere else.

    3. A purchase return of 275 had been recorded in the purchase daybook and in the supplier's personal account as if it were a purchase invoice.

    4. Carol's drawings of 500 for the month of September 2008 had been recorded correctly in the cashbook but then debited to the wages and salaries account.

    5. A debit balance of 370 on a supplier's personal account had been shown as a credit balance on the list of balances extracted from the payables ledger.

    6. The purchase daybook had been overcast by 1,000.

    7. Discounts received totalling 742 had been recorded correctly in suppliers' personal accounts but then entered as 724 in both the discounts received account and the payables control account. Furthermore, the entry in the payables control account had been made on the wrong side of that account.

    8. The credit side of a supplier's personal account in the payables ledger had been undercast by 100.

    Requirements

    (a) Write journal entries as necessary to correct the book-keeping errors which are listed above. (Narratives are not required).

    (b) Show that these journal entries will clear the balance on the suspense account.

    (c) Write up the payables control account and reconcile the balance on this account to the total of the list of balances extracted from the payables ledger. 6

    (d) Calculate Carol's corrected net profit for the year to 30 September 2008.
    ma0641's Avatar
    ma0641 Posts: 15,681, Reputation: 1012
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    #2

    Nov 7, 2014, 03:00 PM
    Do you really expect someone to do this HOMEWORK for you?
    J_9's Avatar
    J_9 Posts: 40,277, Reputation: 5644
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    #3

    Nov 7, 2014, 03:02 PM
    Carol did her own homework. You can too!
    john123456AB's Avatar
    john123456AB Posts: 2, Reputation: 1
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    #4

    Nov 9, 2014, 08:09 AM
    I'm having some problem with the suspense account.
    I can't clear the balance on suspense account. Sorry if I've made silly mistakes, I'm new in account. Here is what I've written for the entries:

    Journal

    1.Purchases invoice 653
    Cash 653
    2 Bank charges 12
    Suspense 12
    3. Supplier A/c 550
    Purchase day book 550
    4. Drawings 500
    Wages & salaries 500
    5.Payable ledger 740
    Suspense 740
    6. suspense 1000
    Purchase say book 1000
    7.suspense 18
    Discount received 18
    Suspense 1466
    Payable 1466 (724*2)+18
    8.Suspense 100
    Payable ledger 100


    Suspense account
    Purchase day book 1000 trial balance difference 1460
    Discount 18 Bank charges 12
    Payable... 100 payable... 740
    Payable... 1466






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