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Question

As an accountant for a company, you are disappointed to learn that the totals in your new trial balance are not equal. After going through a careful analysis, you have discovered only one error. Specifically, the balance of the Office Equipment account has a debit balance of Rs 15,600 on the trial balance. However, you have figured out that a correctly recorded credit purchase of pen drive for Rs 3,500 was posted from the journal to the ledger with a Rs 3,500 debit to Office Equipment and another Rs 3,500 debit to creditor's accounts. Answer each of the following questions and present the amount of any misstatement
(a) Is the balance of the office equipment account overstated, understated or correctly stated in the trial balance?
(b) Is the balance of the creditor's account overstated, understated or correctly stated in the trial balance?
(c) Is the debit column total of the trial balance overstated, understated or correctly stated?
(d) Is the credit column total of the trial balance overstated, understated or correctly stated?
(e) If the debit column total of the trial balance is Rs 2,40,000 before correcting the error, what is the total of credit column?


Solution

According to the given information, trial balance does not agree. Pen-drive is wrongly debited to office equipment account, instead of stationery account and supplier account is debited instead of crediting.

Due to these mistakes, the following errors are committed:
1. The balance of office equipment is overstated by Rs. 3,500.
2. The balance of creditors account id understated by Rs. 7,000.
3.The total of the debit column of the trial balance is correctly stated.
4. The total of the credit column of the trial balance is understated by Rs. 7,000.
5. If the total of the debit column of the trial balance is Rs. 2,40,000 before rectifying error, the total of the credit column of the trial balance is Rs. 2,33,000 (i.e., Rs. 2,40,000 - Rs. 7,000).

Accountancy

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