Question

6. Ade presents a trial balance which showed a difference of ₦388. This has been transferred to the debit side of a Suspense Account. Further investigations revealed the following: (i) Purchase of office equipment for ₦850 was debited to office expenses account. (ii) Sales day book was overcast by ₦1,200. (iii) An invoice for ₦658 received from a supplier was entered correctly in the purchase day book but was posted to the debit side of the supplier's account. (iv) A credit note for ₦720 issued to a debtor was entered in the returns inwards book as ₦270 and was posted to the ledger accordingly. (v) A debtor who owed a sum of ₦420 died without leaving anything behind. This amount was written off as bad debt but no other entry was made in the books. (vi) Cash drawings amounting to ₦900 have not been recorded in the books. (vii) A payment of ₦280 for electricity was entered correctly in the cash book but was posted to the electricity account as ₦820. (viii) A motor vehicle was bought for ₦1,500 by cheque. This transaction was only recorded in the cash book. (ix) Discount received ₦876 have not been posted from the cash book ledger. You are required to show: (a) Journal entries necessary to correct errors; (b) Suspense Account.

Accepted Answer

(a) JOURNAL ENTRIES (Ade)
(i) Dr: Office equipment 850; Cr: Office expenses 850 — being amount on real account posted to nominal account.
(ii) Dr: Sales a/c 1,200; Cr: Suspense a/c 1,200 — being annual overcast on sales daybook.
(iii) Dr: Suspense a/c 1,316; Cr: Creditors–suppliers a/c 1,316 — being amount wrongly debited in the supplier a/c.
(iv) Dr: Return inward a/c 450; Cr: Debtor a/c 450 — being amount undercast on credit note issued to debtors.
(v) Dr: Bad debt a/c 420; Cr: Suspense a/c 420 — being amount written off not recorded in bad debt.
(vi) Dr: Drawings a/c 900; Cr: Cash a/c 900 — being cash drawings not recorded in the books.
(vii) Dr: Suspense a/c 540; Cr: Electricity a/c 540 — being amount overcast on electricity a/c.
(viii) Dr: Motor vehicle 1,500; Cr: Suspense a/c 1,500 — being amount on motor vehicle not recorded in the a/c.
(ix) Dr: Suspense a/c 876; Cr: Discount received a/c 876 — being amount in discount received not transferred.

(b) SUSPENSE ACCOUNT
Dr: Difference b/d 388; Creditors–suppliers 1,316; Electricity 540; Discount received 876 = Total 3,120.
Cr: Sales 1,200; Bad debts 420; Motor vehicle 1,500 = Total 3,120.

WAEC Accounting 2012 Theory — Question 6

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