Waban prepared draft financial statements for the year ended 31 March 2024, which showed a draft profit for the year of £43,750. His draft financial statements were prepared by a Trainee Accountant.

The trial balance failed to agree and contained ledger accounts with the following errors:

(1) Cash sales of £850 had not been recorded in the books.

(2) A purchase invoice for £490 had been correctly recorded in the account of Chitta Products, but had been recorded in the Purchases Day Book as £940.

(3) A motor vehicle, purchased during the year for £8,000, had been debited to the Motor Expenses Account. Depreciation on the motor vehicle should have been charged at the rate of 25% using the straight line method.

(4) Interest received, £630, was correctly entered in the Cash Book, but had been debited to the Interest Received Account.

(5) Electricity supplied by Dalha Electric, £345, had been recorded in the Electricity Account and Dalha Electric Account as £145.

(6) No debit entry had been made for general expenses of £65.

(7) The debt of Habib, £4,100, was now considered irrecoverable. No entries had been made in the books.

(8) Purchases returns to Taj, £85, had been entered in the account of Raj.

Required:

(a) Briefly explain two actions that Waban could take when his trial balance failed to balance.

(b) Prepare the Journal entries to correct the errors in (1) to (8) above. Narratives are not required.

(c) Prepare the Suspense Account showing the original difference in the trial balance on 31 March 2024.

(d) Starting with the draft profit for the year of £43,750, calculate the revised profit for the year showing the effect of each error.

(e) Evaluate preparing draft financial statements from books containing errors.