- This topic has 5 replies, 2 voices, and was last updated 6 months ago by
John Moffat.
John Moffat.-
Posts
-
jcafelatte
- Topics: 14
- Replies: 8
- ☆
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 general expense
(iii) return inwards were included on the credit side of the trial balanceI dont understand what is a discount received column. I understand what overcast means : means it put too much and value too high. for 2nd one, its supposed tobe dr general expense and cr cash but its dr purchases and cr cash. so its the same because both are expenses? so will still balance?
John Moffat
- Topics: 57
- Replies: 49602
- ☆☆☆☆☆
Discounts received columns are rarely used these days, but if they are it is just a memorandum (note) column in order to be able to remember when a discount has been received.
The total of the column is then credited to discounts received and debited to payables. If the column is added wrongly then both of the two entries will be of the wrong amount but will be the same amount, and so the trial balance will still balance.jcafelatte
- Topics: 14
- Replies: 8
- ☆
can i also ask, “return inwards were included on the credit side of the trial balance” i dont understand this statement at all. what do you mean by included on the credit side? I have watched your lectures but maybe i missed this part. I hope you can explain like how you did previously for discount received. It helped me a lot.
John Moffat
- Topics: 57
- Replies: 49602
- ☆☆☆☆☆
Returns inwards are returns coming into the business and are therefore returns from customers.
This means that customers owe us less because of having returned goods, so we credit receivables and debit either sales or returns inwards (it doesn’t matter which).
Here, they are using a return inwards account, and so should have debited it and not credited.
So the balance on the account should be a debit balance and not a credit balance.jcafelatte
- Topics: 14
- Replies: 8
- ☆
sir i dont understand what does debit balance and credit balance mean. so debit balance = debit higher than credit; credit balance = credit higher than debit?
also sir for this question, I cant find it in the revision kit. is the answer C? (iii) only ?
John Moffat
- Topics: 57
- Replies: 49602
- ☆☆☆☆☆
If the debits on an account are bigger than the credits, then we end up with a debit balance on the account. If the credits on an account are bigger than the debits then we end up with a credit balance.
The answer is (iii) only.
jcafelatte
John Moffat- You must be logged in to reply to this topic.