Question

Cash received from Jamna Das Rs. 687 was posted to the debit of Janki Das as Rs. 678. If this error located after preparation of final account then which of the following rectification entry is correct?

• A. Jamna Das A/c Dr. 687
  Janktbas Das Dr. 678
  To Profit & Loss Adj. A/c 1,365
• B. Profit & Loss Adj. A/c Dr. 1365
  To Jamna Das A/c 687
  To Janki Das A/c 678
• C. Suspense A/c Dr. 1,365
  To Jamna Das A/c 687
  To Janki Das A/c 678
• D. Jamna Das A/c Dr. 687
  Janki Das A/c Dr. 678
  To Suspense A/c 1,365

Answer 1

The correct option is C Suspense A/c Dr. 1,365

To Jamna Das A/c 687
To Janki Das A/c 678
When errors are found after preparation of trial balance suspense account is created depending upon the effect of the account. This implies if the effect is on one account only then only suspense account is opened to fulfill double entry system of accounting.

Original entry of cash received from Jamna Das is

Cash A/c Dr 687

To Jamna Das A/c. 687

This amount should be credited to jamna das's A/c while it was debited to Janki Das's A/c. So to cancel the wrong posting Janki Das's A/c will be credited and the amount should be posted in Jamna Das's A/c.

The correct entry therefore becomes,

Suspense A/c Dr 1365

To Janki Das A/c. 678

To Jamna Das A/c. 687