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Hello John,
Could you please explain me why in the Question 4 (Chapter 16) we don’t have to consider the Error 2, where the purchase returns journal was undercast by $1,000, to get the correct answer?Many Thanks!
The total of the list of balances in Adele’s payables ledger was $438,900 at 30 June 2008. This balance did not
agree with Adele’s payables ledger control account balance. The following errors were discovered:
(1) A contra entry of $980 was recorded in the payables ledger control account, but not in the payables
ledger.
(2) The total of the purchase returns journal was undercast by $1,000.
(3) An invoice for $4,344 was posted to the supplier’s account as $4,434.
What amount should Adele report in its Statement of Financial Position as accounts payable at 30
June 2008?Because we are only given the total of the list of balances in the payables ledger, we need to get that total correct.
The only place where we use totals of the various books (payables journal, cash books, returns journal etc. ) is in the control accounts.
In the payables ledger (where we have an account for each individual supplier) we take the separate items from the books of prime entry – we never use the totals of the books.So….for item (2) the payables ledger is correct, it is the control account that is wrong.
(If any of the above confuses you then it might help to watch my lecture on Books of Prime Entry)
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