correction of errors

Discount allowed $3,840 was credited to discounts received account. how to correct this transaction

Question 1: I don't know what you mean by three steps! To correct the first error, you debit asset account with 800 (400 to remove the credit which should not be there, and 400 to put the debit that should be there) and credit suspense account. To correct the second error, you credit discount allowed 400 (to remove 400 that should not be there); credit discount received 400 (which is where it should be); and debit suspense account.

Question 2: This is very similar to the second of your first questions, so you should now find it very easy :-)

hmm thank yuh john :)

computer purchased on 1st oct 2009 for 3500 was entered in bank account 3500 and computer equipment ledger 350. is the correct entry dr computer equipment 3150 cr suspense 3150 OR dr CE 3150 cr bank 3150 and, if 2nd one is correct plz explain me why is this correct

$400 paid for plant maintenance has been correctly entered in the cash book and credited to the plant asset account. sir, i did not understand the logic behind ''debit asset account800 and credit suspense800.''.. I got the double entry as ''dr asset 400 dr maintenance 400 and cr suspense 800''

Hi Archana, Computer purchased for 3500.. the double entry would be: Dr: Computer 3500 Cr: Cash 3500 But, according to question, what they did was; Dr: Computer 350 Cr: Cash 3500 Which means the error was made debiting Computer (i.e. amount less by 3150) and credit was ok. So your 2nd answer is wrong and first answer is correct. As debit Computer is less by 3150, we will debit 3150 Compter more by 3150 and credit Suspense account

For the second one, you are correct to debit asset and maintenance by 400 and suspense credit by 800.

thank yuh nishan :)

Which of the following errors would cause a trial balance imbalance? (i) The discounts received column of the cash payments book was overcast (ii) Cash paid for the purchase of office furniture was debited to the general expenses account (iii) Returns inwards were included on the credit side of the trial balance A (i) only B (i) and (ii) C (iii) only D (ii) and (iii) why option 1 does not cause a trial balance imbalance

Because the total is posted to discounts received and to payables. So if the total is wrong, then both discounts received and payables will be wrong, but because the debit will equal the credit the trial balance will still balance.

I am confused. it says overcast only in discount received not in payable.. isn't it??

It says "discount received column of the cash payments book" :) Cash book is the book of prime entry for Discounts. Total of dicounts columns are used to post to ledgers. Discount received column total will be posted to DR - PLC a/c, CR - Dis. Received a/c. So even if the column total is wrong, debit and credit is still matching, so no imbalance of TB. The error would need to be corrected though.

thank yuh nishan :)

You are welcome in deed.. I thought you would have done your exam by now...?