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Sir how do u solve this question. I don’t understand.
Peter received a statement of account from a supplier Paul, showing balance to be paid of $8950. Peter’s payables ledger account for Paul shows a balance due to paul of $4140.
Investigation reveals the following:1) Cash paid to Paul $4080 has not been allowed for by Paul
2) Peter’s ledger account has not been adjusted for $40 of cash discount disallowed by Paul.What discrepancy remains between Peter’s and Paul’s records after allowing for these items?
You need to watch the free lecture on Books of Prime Entry.
Peter has paid Paul 4080, but paul has not entered it (maybe they received it after they printed the statement). So it means that Paul really thinks he is owed 8950 – 4080 = 4870.
Peter thought they had got a discount of 40, but they have not. So in Peters books they really owe Paul 4140 + 80 = 4220.
So the discrepancy (difference) remaining is the difference between the two figures.
do we need to correct the errors? I don’t understand why u deduct the 4080 from 8950, and add the 80 from 4140.
You do need to correct the errors because the question asks what the difference will be after dealing with the errors.
As to why we need to make those two changes, I have explained in my previous reply.
so Paul is the receivable and Peter is the payable? So we have to to reduce the receivables and add the payables? Am I right?
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