Question

A purchase of Rs.10,000 has been wrongly posted to the debit of Supplier's Account but had been correctly entered in the purchase 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

The correct option is D the debit side to be Rs.20,000 more than credit side

Option D is correct.

When goods are purchased on credit, the purchases account ledger is debited and supplier's account ledger is credited.

Purchase account always has a debit balance whereas supplier's account always has a credit balance. If the amount is posted on the debit of supplier's account, the credit balance of the supplier's account will decrease. In the trial balance the debit side will be 20000 more than the credit side.

For example, if after posting this transaction, the purchases account balance comes Rs 100000, while the supplier's account credit balance before posting this entry was Rs 30000, if the posting was correct the credit balance would have increased to Rs 40000, but after posting it to the wrong side the credit balance decreases to rs 20000. There is a difference of Rs 20000 between the actual and the current credit balance of the account. This implies that debit side of trial balance will be more than credit side.