Question

A purchase of Rs.10,000 has been wrongly posted to the credit of purchase Returns Account but has been correctly entered in the Supplier's Account. The trial Balance would show:

• A. the credit side to be Rs.10,000 more than debit side
• B. the debit side to be Rs.10,000 more than credit side
• C. the credit side to be Rs.20,000 more than debit side
• D. the debit side to be Rs.20,000 more than credit side

Answer 1

Answer: (C)

the credit side to be Rs.20,000 more than debit side

When goods are purchased on credit, the purchases account ledger is debited and supplier's account ledger is credited. In the case purchase return account has been credited wrongly while supplier's account has been correctly credited. The purchase return account and supplier's account have credit balance, which is transferred to the trial balance. Here no posting is made in the purchases account so the purchases account balance which is always debit, will not be affected. The debit balance of the purchase account should be more because of the transaction.

In the trial balance the credit side total will be 20000 more than the debit side because of posting of 10000 twice on the credit side of the books with no corresponding debit entry.