QUESTION ONE
- Briefly explain the following types of errors:
(i) Error ofcommission
(ii) Error ofprinciple
(iii) Complete reversal ofentries
(iv) Compensatingerrors
- The trial balance of Amanda Ltd as at 30 April 2018 did notbalance. On investigation, the following errors were discovered:
- A loan of Sh.2,000,000 from one of the directors has beencorrectly entered in the cashbook but posted to the wrong side ofthe loan account.
- The purchase of a motor vehicle on credit fro Sh.2,860,000 hadbeen recorded by debiting the supplier’s account and crediting themotor expenses account.
- A cheque for Sh.80,000 from Ogola, a customer to whom goods areregularly supplied on credit, was correctly entered in the cashbookbut was posted to the credit of bad debts recovered account in themistaken belief that it was a receipt from Agola, a customer whosedebt had been written off three years earlier.
- In reconciling the company’s cash book with the bank statement,it was found that bank charges of Sh.38,000 had not been entered inthe company’s records.
- The totals of the cash discount columns in the cashbook for themonth of April 2018 had not been posted to the respective discountaccounts.
The figures were:
| Sh. |
Discounts allowed | 184,000 |
Discounts received | 397,000 |
- The company had purchased some plant on 1 March 2017 forSh.1,600,000. The payment was correctly entered in the cashbook butwas debited to the plant repairs account. Depreciation on suchplant is provided for at the rate of 20% per annum on cost.
Required:
(i) Journal entries with narrations to correct the above errors.
(ii) Suspense accounts showing the originaldifference
