3. Verification of accounting records
A section of Accounting, 7707
Listing 10 of 107 questions
Eshe is a trader. She has prepared a trial balance at 31 March 2023. The totals did not agree and the difference was placed in a suspense account. Eshe later discovered the errors shown in the following table. REQUIRED Complete the table to show the entries required to correct each error. The first one has been completed as an example. Error Entries required to correct the error Debit Credit Account $ Account $ A payment for rent, $300, had been debited to the insurance account. Credit sales to Raymond of $105 had been debited to the sales account and credited to Raymond’s account. Eshe’s total drawings from the bank for her own use, $9500, had been debited to the cash account. A purchases invoice from Danika for $137 had been recorded in her account and in the purchases journal as $173. Returns inwards, $44, had not been recorded in the returns inwards account. The motor expenses account had been overcast by $100. Rent paid Insurance Prepare the suspense account. Include the balancing figure as the original difference on the trial balance. Eshe Suspense account Date Details $ Date Details $ Eshe’s capital at 1 April 2022 was $31 000. Her draft profit for the year ended 31 March 2023 before correction of the errors was $15 600. REQUIRED Calculate Eshe’s capital at 31 March 2023 after the errors have been corrected.
7707_s23_qp_21
THEORY
2023
Paper 2, Variant 1
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Razia’s financial year ends on 30 September. The totals of the trial balance on 30 September 2020 did not agree. The totals were debit $10 450 and credit $10 250. A suspense account was opened. The following errors were later discovered. The total of the sales returns journal had been overcast by $300. Cash sales, $820, had not been recorded in the books of account. A purchase invoice, $190, had been credited to the account of P Hill instead of D Hill. A cheque payment, $240, for motor repairs had been correctly entered in the cash book but had been posted to the debit of motor repairs account as $420. Rent received, $310, had been debited to the rent payable account. Staff wages, $250, had been posted to Razia’s drawings account. A cheque paid, $900, to Kamil, a credit supplier, had been entered correctly in the cash book but had not been posted to Kamil’s account. REQUIRED Prepare the suspense account. Start with the balance arising from the difference on the trial balance. The account should be balanced or totalled as necessary. Razia Suspense account Date Details $ Date Details $ Identify the types of error made in Error 2 and Error 4. Error Type of error Complete the table by placing a tick (✓) in the correct column to indicate the effect on the profit for the year of correcting each error. Error number Increase profit Decrease profit No effect on profit Razia is considering whether or not to sell on cash terms only. REQUIRED Advise Razia whether or not she should sell on cash terms only. Justify your answer with two advantages and two disadvantages of selling on cash terms only.
7707_w20_qp_22
THEORY
2020
Paper 2, Variant 2
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Nikita is a trader. The totals of her trial balance at 30 June 2021 did not agree. The debits exceeded the credits by $2600. Nikita opened up a suspense account. The following errors were later discovered. Insurance of $2500 had been entered as $4500 in the insurance account. The correct entry had been made in the cash book. The total of the discount received column in the cash book of $500 had been debited to the discount allowed account in the general ledger. Credit sales of $1400 to Kajal had been correctly entered in the sales account, but debited as $1000 in Kajal’s account. A cheque of $700 received from Anisah had been correctly entered in the cash book, but credited to Aisha’s account. REQUIRED Prepare journal entries to correct errors 1 to 4. Narratives are not required. Nikita Journal Error number Details Debit $ Credit $ …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… …………… Prepare the suspense account. Start with the difference on the trial balance. Nikita Suspense account Date Details $ Date Details $ Complete the statement to show the effect on the profit for the year of correcting errors 1 to 4. Where the error does not affect profit write ‘no effect’. Calculate the corrected profit for the year. Nikita Statement of corrected profit for the year ended 30 June 2021 $ Profit for the year before corrections 28 000 Increase in profit $ Decrease in profit $ Error 1 Error 2 Error 3 Error 4 _________ _________ _________ _________ _________ Corrected profit for the year _________
7707_w21_qp_22
THEORY
2021
Paper 2, Variant 2
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MG has been in business for a number of years as a furniture manufacturer. On 31 August 2022 the bank column of his cash book showed the business had $25 600 in the bank account. The bank statement on this date showed a credit balance of $24 815. The following transactions were included only in the cash book. $ Cheque paid to JW Cheque received from TH In addition, an error had been identified. A standing order for rates of $205 had incorrectly been recorded in the cash book as $255. The following transactions were included only on the bank statement. $ Dishonoured cheque received from RJ Insurance paid by direct debit Bank charges REQUIRED Update the cash book of MG. Bring down the updated balance on 1 September 2022. MG Cash book (bank columns only) Date Details $ Date Details $ Prepare a bank reconciliation statement at 31 August 2022. MG Bank reconciliation statement at 31 August 2022 State two reasons why a business would prepare a bank reconciliation statement. State two possible reasons why the cheque from RJ was dishonoured. Explain the differences between a direct debit and a standing order. A potential new customer has asked MG for a 5% discount on any orders placed. Advise MG on whether to accept or decline these terms. Justify your answer.
7707_w22_qp_22
THEORY
2022
Paper 2, Variant 2
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Questions Discovered
107