Quiz

Question 1

On December 31, 2010, John Henry found that the debit side of his trial Balance exceeded the credit side by $492. The difference was put to a suspense account.  February 11 of 2011 the following errors were discovered in the books:

1. $165 paid for the purchase of Fixtures had been entered to Purchases account.

2. Commissions received of $112 was debited to the Commissions received account.

3. The Returns Inwards Book was overcast by $57 and the wrong amount was entered to the Returns Inwards account.

4. $ 217 cash paid to Mike Collester was debited to his account as $271.

5. $15 goods sold to Lee Gray was debited to Lee May’s account.

6. A cheque for $157 received from M. Ruddock was not entered to his account.

Required:

(a) State one purpose of the Trial Balance.

(b) Prepare the necessary Journal entries to correct the above mistakes.

(c) Enter up the Suspense Account.

(d) Identify from the above, ONE error of principle and ONE error of commission.

Solution

(a) The Trial Balance acts as a statement which arithmetically proves that proper double entry is observed in making accounting entries. There are several errors which will not be revealed by the Trial Balance.

(b)

(c)

(d)(i)  Error of Principle occurred in error # 1 where $165 paid for the purchase of Fixtures had been entered to Purchases account.

(ii) Error of Commission occurred in error # 5 where $15 goods sold to Lee Gray was debited to Lee May’s

account.

Question 2

R. Guberman keeps a three column Cash Book. All cheques received are banked immediately. All small payments of $20 or less are paid out of a petty cash float of $50 and recorded in a Petty Cash Book with four analysis columns:  Postage, Travelling, Sundry Expenses, and small purchases of stock.

Using the following information, you are required to:

1. Write up his Cash Book and balance it.

2. Write up the Petty Cash Book and balance it.

October 16 Balances:    Bank                                    574

Cash                                                 126

Petty Cash                                          19

17     Reimbursed petty Cash Float

17     E Winters settled his debt of $580 by cash

less 5% discount.

19     Received cheque from A. Adam                      675

19     Paid for stock by cheque.                                  473

20     Bank charges for services.                                    3

21     Cash sales for the week                                    720

21     Purchased postage stamps                                  12

21     Purchased small items of stock                          17

22     Banked cash                                                       500

22     Paid for stock by cheque                                   650

23     Drew cheques for wages.                                   300

23     Paid taxi fare for errands                                  7.65

24     Sent R. Boone a cheque to settle a debt

of $750 , less 4% cash discount.

26     Reimbursed petty cash float

26     Paid for postage of package.                                18

28     Cash sales for the week                                  1,275

28     Banked cash                                                    1,553.35

30     A. Adam’s cheque for $675 marked

Dishonoured was returned.

31    Paid for cleaning and painting.                             15

Solution

1.

2.

Question 3

The following were transactions for Green Food Enterprises for the month of June 2007.

$

September 1       Sold Goods to V. Bentley                                                        4,500

September 6       V. Bentley returned goods to us                                                 1,200

September 9       Bought goods on credit from M. Mickey                                        8,400

September 11     Sold goods on credit to C. Ryan                                                  2,400

September 17     Credit purchases from Discount Wholesalers                                 3,000

September 22     Returned goods to M. Mickey                                                      400

September 24     Bought Fixtures from Best Furnishings for use in the business     4,900
September 28    Sold goods on credit to B. Gumby                                                  1,350

Required:

(A)   Make Entries in the books of original entry (subsidiary books) for Green Food Enterprises.

(B)   Post the books of original entry to the ledger at the end of the month.

Solution

(A)

(B)

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