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. Purchases 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

Answer: (B)

Profit & Loss Adj. A/c Dr. $10,000$

To Suspense A/c $10,000$
Purchase book was undercast by Rs.10000. It is a single-sided error and affected the profit & loss account. Profit of the year is overstated as purchases book short by Rs.10000.

This needs to be rectified in the subsequent year as error has located after the preparation of final accounts. Below rectification will be passed:

Profit & Loss Adjustment A/c Dr. 10000

To Suspense A/c 10000