TUTORIAL QUESTION # 1

The following list of errors were detected in the books Yousuf Youhana
a. Payment of $500 cash for refreshment was not posted to the books
b. Cheque for $2000 received from M. Waugh was credited to S. Waugh
c. Motor vehicle repairs for $3000 was posted to the Motor Vehicle account
d. Credit sales invoice for $5100 to A. Razzaq was posted to the books as $5001
e. Lodgment of $10,000 cash to the bank was posted as Dr in cash and Cr in Bank
f. Waqar Younis, a part time clerk, made the following postings in error to the general
ledger: sales short by $600, Postage expense short by $200, stationery short by $400

Required : Show the general journal entries to correct the above errors.

DR CR
a Refreshment 500
Cash 500
Correction of error of omission

b S. Waugh 2,000
Bank 2,000
Bank 2,000
M. Waugh 2,000
Correction of error of commission

c Bank 3,000
Motor Vehicle 3,000
Motor Vehicle Repairs 3,000
Bank 3,000
Correction of error of principle
d Sales 5,001
. A Razzaq 5,001
A Razzaq 5,100
Sales 5,100
Correction of error of original entry
e Bank 10,000
Cash 10,000
Bank 10,000
Cash 10,000
Correction of error of reversal of entry
f. Postage 200
Stationery 400
Sales 600
Correction of errors of compensation
TUTORIAL QUESTION # 2

Gregory Issacs’ trial balance failed to agree, and the difference of $5,000 on the CR
column was posted to the suspense account. The net profit obtained then was $26,500.

An audit was conducted, and the following errors located :

a. One page of the sales daybook was added short by $2,000

b. Machinery repairs for $350 by cheque was posted to the Machinery Account
c. Payment of $150 by cash for stationery was posted to general office supplies
d. Purchase of equipment for $5,000 by cheque was posted as fixtures and fittings
e. Included in the purchases account was goods valued at $4,500 for Iaascs’ personal use
f. Although correctly posted to the commission account, cheque for $30,000 received
from Mystic Music was posted to the bank as $33,000.

Required :

Show the journal entries to correct these errors, then write up the suspense account and
prepare the statement of corrected net profit.

DR CR
a. Suspense 2,000
Sales 2,000
Incorrect addition in the sales daybook
b. Bank 350
Machinery 350
Machine Repairs 350
Bank 350
Correction of error of principle
c. Cash 150
General Office 150
Stationery 150
Cash 150
Correction of error of principle
d. Bank 5,000
Fixtures and Fittings 5,000
Equipment 5,000
Bank 5,000
Correction of error of principle
e. Drawings 4,500
Purchases 4,500
Correction of error of principle
f. Suspense 3,000
Bank 3,000
Incorrect posting to the cashbook
 Suspense Account
Sales 2,000 Bal c/d 5,000
Bank 3,000
--------- --------
5,000 5,000
===== =====

It is taken that the suspense account should close after the correction of all the errors.
Thus, in some cases the opening balance is not given, but is derived as the amount needed
to close the accounts after posting all the items from the general journal.

STATEMENT OF CORRECTION OF NET PROFIT

Net Profit as per calculation 26,500

Add: Items on the Cr Side

-----------------------------------------------
Sales 2,000
General Office Expense 150
Purchases 4,000 6,650
---------- ----------
33,150

Less : Items on the Dr Side

---------------------------------------------
Machine Expense 350
Stationery 150 (500)
---------- -----------
= Corrected Net Profit 32,650
======

In addition to the items in the general journal, the statement of correction of net profit may
also include adjustment in the value of the closing stock. An increase in stock would
result in an increase in profit, while a decrease in stock would result in a decrease in profit.
TUTORIAL QUESTION

Ryan Hinds has prepared the following trial balance at the end of December 2001 :

Capital 53,780
Purchases 9,000
Sales 18,400
Return Inwards 100
Return Outwards 250
Depreciation for the year 890
Wages 4,300
Discounts Allowed 450
Discounts Received 270
Debtors 1,250
Creditors 2,750
Premises 45,000
Fixtures & Fittings 8,900
Bank Overdraft 1,200
Cash 150
Carriage Inwards 370
Opening Stock 2,500
Carriage Outwards 140
Sundry Expenses 1,420
Prov. for Bad Debts 420
-------- ----------
75,770 75,770
====== ======

Prior to the preparation of the trial balance Hinds received a draft to tour with the West
Indies Cricket Team ( evidently his excitement resulted in a few accounting errors).
Suspect of apparent errors, an audit was carried out, and the following errors located :

a. A page of the purchases day book was undercast by $3,000

b. A total in the sales day book was carried forward as $1,000 instead of $1,600
c. The sale of some old fixtures for cash for $300 has been credited to sales
d. Return inwards of $100 have been posted to the return outwards account

Required :

i. Rewrite the trial balance, entering the difference if any to a suspense account
ii. Prepare journal entries to correct the errors located
iii. Write up the suspense account