No. 3(a) (i): Preparation of journal entries to correct the errors: Workings and explanations: Error 1: The cheque was actually made out for $303 but was record as $330. This resulted in the bank account being understated by $27 ($330-$303), and the purchases account being overstated by $27. To correct this error, a debit entry must be made to the bank account and a credit entry made to the purchases account in the amount of $27. Error 2: The cheque of $467 made out to pay R. Sant was only recorded in the creditor’s account. This is a one-sided entry error and would thus affect the suspense account as the Trial Balance would not have balanced. The bank account would have been overstated as the payment was not recorded there. Therefore to correct this error, a debit entry must be made to the suspense account and a credit entry made to the bank account in the amount of $467. Error 3: C. Samanah paid V. Cheeseman $290, however the payment was recorded as if V. Cheeseman paid C. Samnah $290. This is a complete reversal of entry. To correct this erroneous entry, a debit entry must be made to the bank account and a credit entry made to the C. Samnah's account in the amount of $290, this will nullify the erroneous entry. Additionally another entry needs to be made to record the payment made by C. Samnah, therefore it is necessary to debit the bank account and credit C. Samnah’s account a second time to accurately reflect the original payment made by the debtor. There are two ways in which this correction can be made: Method One: Debit – Bank a/c - $290 Credit – C. Samnah's a/c - $290 To nullify erroneous entry. Debit – Bank a/c - $290 Credit – C. Samnah's a/c - $290 To record payment of $290 made by C. Samnah. Or Method 2: Debit – Bank a/c - $580 Credit – C. Samnah's a/c - $580 To nullify erroneous entry and to record the payment of $290 made by C. Samnah. Now that all the errors have been worked through, the general journal entries can now be written up.
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AuthorThe author holds a Bsc (Hons) Degree in Applied Accounting from Oxford Brookes University, England and enjoys a successful career as an Accounting Supervisor and a private tutor. Archives
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