Question

Purchases book was undercast by Rs. 10,000. If this error located after preparation of final account then which of the following rectification entry is correct?

• A. Purchase A/c Dr. 10,000
  To Profit & loss Adj. A/c 10,000
• B. Profit & Loss Adj. A/c Dr. 10,000
  To Suspense A/c 10,000
• C. Suspense A/c Dr. 10,000
  To Profit & Loss Adj. A/c 10,000
• D. Profit & Loss Adj. A/c Dr. 10,000
  To Purchases A/c 10,000

Answer 1

The correct option is A Purchase A/c Dr. 10,000

To Profit & loss Adj. A/c 10,000
Suspense account is opened when there is one sided error i.e., the effect of which is seen on one account only. In such situations suspense account is opened to complete the double entry and follow double entry system of book keeping.

Purchase account always has a debit balance and when purchase book is undercast by some amount. This implies purchase account has to be debited. The correct entry therefore becomes -

Purchases A/c Dr. 10000

ToProfit & Loss adj. A/c. 10000
As error is located after preparation of Final accounts, profit & loss adj a/c will be credited in place of suspense account.