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Hello Tutor,
I do not understand why in this question the answer is (i) as I thought the discount received column was added up wrongly, will cause the wrong balance in cash payments book. So the trial balance will imbalance. Can you please enlight me in this question? Thank you!
If a trial balance does not balance, which of the following errors might have caused this?
(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)Solution: In Statement (i) both sides of the double entry posting from the cash book would be incorrect but equal in value, so this would not cause a trial balance imbalance. In Statement (ii), both expenses and non-current assets are debit balances in the trial balance, so posting to the wrong account in this case would not cause a trial balance imbalance.
The discounts received column in the cash book is only a memorandum (i.e. note) column. It is not included in adding up the other analysis columns because it is not recording any cash. It is simply a note and the total of that column is then posted to discounts received and to payables. So if the total is wrong then the balances on both discounts received and payables are both wrong.
Thank you tutor for your detailed explanation. I really appreciate that!
But one concern is still that, why they used the term “The discounts received column of the cash payments book” when discounts received have nothing to do with cash payments book? I remember that the double entry is: DR: Payable Control Account, CR: Discounts received.
Thank you tutor!
When you pay a supplier you record the amount of the payment in the cash payments book.
However it is when you are making the payment that you know you have received a discount from the supplier, and so you make a note of it in the discounts received column in the cash payments book. It is only a memorandum (i.e. a note) column and the double entry for it is as you have written.
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