Question

Cartage Rs. 780 paid on machinery newly acquired was debited to carriage inward account. If this error located after preparation of trial then which of the following rectification entry is correct?

• A. Machinery A/c Dr. 780
  Carnage Inwards Dr. 780
  To Profit & Loss Adj. A/c 1,560
• B. Machinery A/c Dr. 780
  To Carriage Inwards A/c 780
• C. Suspense A/c Dr. 1,560
  To Machinery A/c 780
  To Carriage Inwards A/c 780
• D. Carriage Inwards A/c Dr. 900
  To Machinery A/c 900

Answer 1

The correct option is B Machinery A/c Dr. 780

To Carriage Inwards A/c 780
Machinery is an asset to the business. So any expenditure incurred on the carriage and installation of machinery is treated as capital expenditure and is debited to machinery account.

Carriage imwards has been wrongly debited instead of machinery account. So to rectify the error machinery account will be debited and carriage imwards account will be credited to cancel the original entry.