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I am in the process of preparing for my FA1 exams and would appreciate some help understanding these questions I came across. Can you please explain reasons why something is added/deducted/ignored when giving the answer.
Question 1.
The payables ledger account of Tiny Ltd. in the books of Vasty shows a balance of $3000 at the end of March 20×7. This is different from the balance in the statement provided by Tiny Ltd. The following were the causes of this difference.
(i) Purchase not recorded by Vasty Ltd of $200
(ii) Discount of $250 was not recorded by Tiny Ltd.
What is the balance according to Tiny Ltd after reconciling the above errors?
Question 2
The receivables ledger of Saffron Ltd in the books of Daffodils Ltd shows a balance of $4200 at the end of March 20×7. This was different from the balance in the statement provided by Saffron Ltd. The following were the causes of this difference.
(i) Sales return was not recorded by Daffodils Ltd of $500
(ii) Discount of $200 was not recorded by Saffron Ltd.
What is the balance according to Saffron Ltd after Daffodils reconciles the above errors?
I would appreciate it if the workings can be shown in detail. Thank you
1
(i) Tiny will have credited this in its books; Vasty hasn’t. Therefore, and up to date balance would show 3000 + 200 = 3200
(ii) Vasty has paid Tiny and amount and assumed that Tiny would give a discount of 250. Tiny hasn’t recognised this, but that’s an error in Tiny’s books and no adjustment is needed in Vasty’s books
So, I think the answer is 3200
2
(i) If the sales return had been recorded by Daffodils, this would reduce the amount that Saffron owes by 500. 3,200 – 500 = 2,700
(ii) Appears to be an error by Saffron, so will not affect Daffodil’s books.
So, I think the answer is 2,700
Hope that helps
Hope that’s right!
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