A trial balance before adjustments shows the following items (all amounts in $\N$):\n\nSales \N500,000 (C)\nPurchases \N300,000 (D)\nRent expense \N50,000 (D)\nSalaries expense \N80,000 (D)\nCapital \N200,000 (C)\nDrawings \N30,000 (D)\nCash \N70,000 (D)\nBank \N120,000 (D)\nSuspense account \N10,000 (D)\n\nTotal debits = \N660,000; total credits = \N700,000, giving a credit excess of \N40,000. It is later discovered that a purchase of inventory on 15 March for \N40,000 was omitted from the trial balance. Identify the error, state the correcting journal entry, and give the corrected balance of the suspense account.

Question

A trial balance before adjustments shows the following items (all amounts in $\N$):\n\nSales                                      \N500,000  (C)\nPurchases                              \N300,000  (D)\nRent expense                            \N50,000  (D)\nSalaries expense                        \N80,000  (D)\nCapital                                  \N200,000  (C)\nDrawings                                 \N30,000  (D)\nCash                                     \N70,000  (D)\nBank                                     \N120,000  (D)\nSuspense account                        \N10,000  (D)\n\nTotal debits = \N660,000; total credits = \N700,000, giving a credit excess of \N40,000. It is later discovered that a purchase of inventory on 15 March for \N40,000 was omitted from the trial balance. Identify the error, state the correcting journal entry, and give the corrected balance of the suspense account.

Accepted Answer

Error: omitted purchase of \N40,000. Correcting entry - Debit Purchases \N40,000, Credit Suspense \N40,000. New suspense balance = \N30,000 credit.

Neco Model Questions Vol1 2019 Financial Accounting Question 35

Answer Options

About This Question

Master the Exam!