Free Mba Semester 1 Solved Assignments For -MB0041 - Q. The trial balance of Nilgiris Co Ltd., as taken on 31st December, 2002 did not tally and the difference was carried to suspense account. The following errors were detected subsequently.

a) Sales book total for November was under cast by Rs. 1200.

b) Purchase of new equipment costing Rs. 9475 has been posted to Purchases a/c.

c) Discount received Rs.1250 and discount allowed Rs. 850 in September 2002 have been posted to wrong sides of discount account.

d) A cheque received from Mr. Longford for Rs. 1500 for goods sold to him on credit earlier, though entered correctly in the cash book has been posted in his account as Rs. 1050.

e) Stocks worth Rs. 255 taken for use by Mr Dayananda, the Managing Director, have been entered in sales day book.

f) While carrying forward, the total in Returns Inwards Book has been taken as Rs. 674 instead of Rs. 647.

g) An amount paid to cashier, Mr. Ramachandra, Rs. 775 as salary for the month of November has been debited to his personal account as Rs. 757.

Pass journal entries and draw up the suspense account.

Solution:

Nilgiris Co Ltd.

Date	Particulars	LF	Debit Rs.	Credit Rs.
31-12-2002	Suspense account                           Dr To Sales account (Being under casting of sales bookrectified)		1,200	1,200
31-12-2002	New Equipment account                    Dr To Purchases account (Being wrong debit given to purchases account rectified)		9,475	9,475
31-12-2002	Discount allowed account                   Dr Suspense account                              Dr To Discount received account (Being discount received and discount allowed posted to wrong sides of discount account rectified)		1,700 800	2,500
31-12-2002	Suspense account                              Dr To Longford’s account (Being short credit given to Longford rectified)		450	450
31-12-2002	Sales account                                     Dr To Suspense account (Being stock used for personal purpose wrongly credited to sales account rectified)		255	255
31-12-2002	Suspense account                              Dr To Returns Inwards account (Being excess debit given to returns inwards account to the extent of Rs27, now rectified)		27	27
31-12-2002	Salary account                                   Dr To Ramachandra‘s account To Suspense account (Being the wrong debit of salary to the personal account of Ramachandra now rectified)		775	757 18

Note:

Discount received Rs.1250 is posted on the wrong side of discount account. Discount received (income) should be credited and discount allowed (expenses) should be debited. Instead of crediting the discount received account, it has been wrongly debited. To rectify this error, we need to credit discount received account to the extent of Rs.2500 (Rs.1250+ Rs.1250).

In the same context, discount allowed (which is an expense) should be debited, instead it is credited.

To rectify the error, we need to debit discount allowed to the extent of Rs.1700 (850 +850). The difference between discount received and discount allowed account is transferred to suspense account.

     Dr                           SUSPENSE ACCOUNT                               Cr

Particulars	Amount Rs.	Particulars	Amount Rs.
To Sales account To Discount received a/c To Longford To Returns Inwards a/c	1,200 800 450 27	By Sales By Salary By Balance c/d	255 18 2,204
Total	2,477	Total	2,477