7707 J Errors and suspense account

The income statement of a business showed a loss for the year of $16 000.

On checking the books the following errors were discovered.

1 No adjustment had been made for insurance prepaid, $480.

2 No entry had been made for bank charges, $620.

What was the correct loss for the year?

• $14 900

• $15 860

• $16 140

• $17 100

Sita discovers that $1000 received from the sale of fixtures had been entered in the sales account.

Which journal entry corrected this error?

• Dr. bank 1000

  Cr. disposal of fixtures

  1000

• Dr. bank 1000

  Cr. fixtures 1000

• Dr. sales 1000

  Cr. disposal of fixtures

  1000

• Dr. sales 1000

  Cr. fixtures 1000

The totals of a trial balance did not agree and $200 was debited to a suspense account.

On checking the books it was found that two errors had been made.

1 A sales invoice for $700 had been recorded in the sales journal as $770.

2 The sales journal had been totalled incorrectly.

What was the error made in totalling the sales journal?

• overcast by $130

• overcast by $200

• undercast by $130

• undercast by $200

What is the effect of treating an item of capital expenditure as revenue expenditure?

1 Cost of non-current assets is overstated.

2 Cost of non-current assets is understated.

3 Depreciation for the year is overstated.

4 Depreciation for the year is understated.

• 1 and 3

• 1 and 4

• 2 and 3

• 2 and 4

Which error is an error of original entry?

• sale of surplus office equipment on credit to Janet for $230 entered as $320 in both the

  disposal account and Janet’s account

• sale of surplus office equipment on credit to Janet for $230 entered in the office equipment

  account and Jason’s account

• sale of surplus office equipment on credit to Janet for $230 entered in the sales account and

  Janet’s account

• sale of surplus office equipment on credit to Janet for $230 not entered in any accounts

A cheque, $85, received from Shakeel, was credited to the account of Shamz.

Which journal entry corrects this error?

• Dr. bank 85

  Cr. Shakeel 85

• Dr. Shakeel 85

  Cr. Shamz 85

• Dr. Shamz 85

  Cr. bank 85

• Dr. Shamz 85

  Cr. Shakeel 85

What is an example of a compensating error?

• A payment for office equipment repairs was debited to the office equipment account.

• A purchase of goods from C Jones was credited to the account of C Johns.

• The sale of goods, $65, to A Aziz was entered in the books as $56.

• The wages account was undercast by $100 and the rent account was overcast by $100.

After the preparation of Abdul’s draft financial statements, two errors were discovered.

The purchase of a machine by bank transfer, $5000, was omitted from the accounts.

The purchase of a motor vehicle, $15 000, was entered in the motor vehicle repair account.

What effect will correcting these errors have on the non-current assets and the working capital?

• A

• B

• C

• D

At the end of his financial year, Zane opened a suspense account.

Why was it necessary to open this account?

• the suspense account had been omitted from the ledger

• the trial balance totals did not agree

• to correct an error of commission

• to make sure no errors were made in the ledger

Jack has opened a suspense account. He has found that rent paid of $250 has been correctly

entered in the rent account but credited to the bank account as $520.

Which entries will correct this error?

• A

• B

• C

• D