The bookkeeper has prepared a preliminary trial balance of Suzzy and Daryl for the year ended...

  

 

 

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The bookkeeper has prepared a preliminary trial balance of Suzzy and Daryl for the year ended 31 December as follows. GH¢ Capital account Profit and loss account at 1 January Bank loan Debtors and creditors 77,240 Cash in hand and bank overdraft 1,000 Stocks and work in progress at 1 January 108,000 Fixed assets at cost and depreciation provision at 31 December 161,879 15,000 300,297 Depreciation for the year Purchased and sales Returns Discounts allowed and received Wages and salaries (net) Payments of PAYE income tax Payments of National Insurance Creditors for PAYE at 1 January Proceeds of sale of fixed assets Rent, rates and insurance Postage, telephone and stationery Repairs and maintenance Advertising Packaging materials Motor expenses Sundry expenses Loan interest Accrued expenses Suspense account 4,370 9,760 12,146 5,988 4,766 18,036 3,009 2,124 4,876 924 2,000 1,000 4,000 1.030 737,445 GH¢ 110,000 50,000 30,458 60,260 5,036 60,943 400,000 4,630 6,740 900 2,000 6,478 737,445 When the bookkeeper discovered that the preliminary trial balance did not balance he made it do so by opening a suspense account and entering the amount on the appropriate side. A subsequent investigation shows the following mistakes have been made. Page9 (1) (2) (3) (4) (5) (6) (8) (9) (10) (11) (12) (13) (14) A loan to the business of GH¢10,000 from the owner's brother, Amfic, has been added to capital. Accrued interest on the bank loan of GH¢458 has been credited to the bank loan account instead of being treated as a current liability. Bank charges of GH¢1,000 have been completely omitted from the books. Fixed assets with an original cost of GH¢11,879 and accumulated depreciation of GH¢10,943 have been sold for GH¢ 2,000. This amount is shown as a separate item in the trial balance, and no entry has been made in the assets or provision for depreciation accounts. Any surplus or deficit on sale should be shown in a separate account. Deduction of GH¢6,088 for PAYE income tax and GH¢1,766 for National Insurance, graduated pensions, etc, were made from employees' wages and salaries during the year. The company's contribution for National Insurance amounted to GH 3,000. No entries have been made for these items. In addition to allowing discount of GH 240 and receiving discount of GH¢260, various debtors and creditors' accounts amounting to GH¢10,000 were set off by contra. No entries have been made in respect of these items. Debtors amounting to GH 2,000 are bad and need to be written off. A debt of GH¢1,000 written off as bad in a previous year has been recovered in full. The amount has been credited to the debtors' account and deducted from the total of the other debtors. Goods returned from a debtor of GH¢630 have been correctly entered into the debtor's account but by mistake were entered in the returns outwards journal. A payment for stationery of GH¢234 was correctly entered in the cash book but debited in the ledger as GH¢243. A payment of GH¢76 for packing materials has been correctly entered in the cash book, but no other entry has been made. A payment of GH¢124 for advertising has been debited to repairs and maintenance. A cheque payment of GH¢26 for insurance has been recorded in all accounts as GH¢62. A page in the purchase account correctly totalled GH¢125,124 was carried forward to the top of the next page as GH¢125,421. All entries other than those given above are to be assumed to have been made correctly. Requirements (a) Show the correcting entries in journal form (i.e. showing accounts and amounts debited and credited but no supporting narrative is required) in respect of each of the mistakes mentioned above. (b) Show the trial balance of the company at 31 December after these corrections have been made. A working, showing how the suspense account is cleared, should be included. Note Control accounts are not maintained. The bookkeeper has prepared a preliminary trial balance of Suzzy and Daryl for the year ended 31 December as follows. GH¢ Capital account Profit and loss account at 1 January Bank loan Debtors and creditors 77,240 Cash in hand and bank overdraft 1,000 Stocks and work in progress at 1 January 108,000 Fixed assets at cost and depreciation provision at 31 December 161,879 15,000 300,297 Depreciation for the year Purchased and sales Returns Discounts allowed and received Wages and salaries (net) Payments of PAYE income tax Payments of National Insurance Creditors for PAYE at 1 January Proceeds of sale of fixed assets Rent, rates and insurance Postage, telephone and stationery Repairs and maintenance Advertising Packaging materials Motor expenses Sundry expenses Loan interest Accrued expenses Suspense account 4,370 9,760 12,146 5,988 4,766 18,036 3,009 2,124 4,876 924 2,000 1,000 4,000 1.030 737,445 GH¢ 110,000 50,000 30,458 60,260 5,036 60,943 400,000 4,630 6,740 900 2,000 6,478 737,445 When the bookkeeper discovered that the preliminary trial balance did not balance he made it do so by opening a suspense account and entering the amount on the appropriate side. A subsequent investigation shows the following mistakes have been made. Page9 (1) (2) (3) (4) (5) (6) (8) (9) (10) (11) (12) (13) (14) A loan to the business of GH¢10,000 from the owner's brother, Amfic, has been added to capital. Accrued interest on the bank loan of GH¢458 has been credited to the bank loan account instead of being treated as a current liability. Bank charges of GH¢1,000 have been completely omitted from the books. Fixed assets with an original cost of GH¢11,879 and accumulated depreciation of GH¢10,943 have been sold for GH¢ 2,000. This amount is shown as a separate item in the trial balance, and no entry has been made in the assets or provision for depreciation accounts. Any surplus or deficit on sale should be shown in a separate account. Deduction of GH¢6,088 for PAYE income tax and GH¢1,766 for National Insurance, graduated pensions, etc, were made from employees' wages and salaries during the year. The company's contribution for National Insurance amounted to GH 3,000. No entries have been made for these items. In addition to allowing discount of GH 240 and receiving discount of GH¢260, various debtors and creditors' accounts amounting to GH¢10,000 were set off by contra. No entries have been made in respect of these items. Debtors amounting to GH 2,000 are bad and need to be written off. A debt of GH¢1,000 written off as bad in a previous year has been recovered in full. The amount has been credited to the debtors' account and deducted from the total of the other debtors. Goods returned from a debtor of GH¢630 have been correctly entered into the debtor's account but by mistake were entered in the returns outwards journal. A payment for stationery of GH¢234 was correctly entered in the cash book but debited in the ledger as GH¢243. A payment of GH¢76 for packing materials has been correctly entered in the cash book, but no other entry has been made. A payment of GH¢124 for advertising has been debited to repairs and maintenance. A cheque payment of GH¢26 for insurance has been recorded in all accounts as GH¢62. A page in the purchase account correctly totalled GH¢125,124 was carried forward to the top of the next page as GH¢125,421. All entries other than those given above are to be assumed to have been made correctly. Requirements (a) Show the correcting entries in journal form (i.e. showing accounts and amounts debited and credited but no supporting narrative is required) in respect of each of the mistakes mentioned above. (b) Show the trial balance of the company at 31 December after these corrections have been made. A working, showing how the suspense account is cleared, should be included. Note Control accounts are not maintained.

Answer rating: 100% (QA)

STEP 1 GETTING YOUR JOURNAL IN ORDER SUZZY AND DARYL VENTURES JOURNAL FOR THE YEAR ENDING 31 DEC 20 ... View the full answer