2006/2/09/MA Page 2 of 11
The Trial Balance of M Mae at 31 January 2008 showed a difference which was posted to a suspenseaccount.Draft final accounts for the year ended 31 January 2008 were prepared showing a net profit of £94,480.The following errors were subsequently discovered:(1) The sales journal had been undercast by £4,000(2) Repairs to a machine amounting to £980 had been charged to the machinery account(3) Purchases, from P Wong, amounting to £1,530, had been received on 31 January 2008 andincluded in the closing stock on that date, but the invoice had not been entered in the purchases journal(4) Sales of £900 to C Choo had been debited to S Chung(5) A payment of £350 for telephone expenses had been entered on the debit side of the telephoneaccount as £550(6) A cheque for £3,000 in respect of rent received had only been entered in the cash book.
(a) Show the journal entries necessary to correct the above errors. Narratives are
required.(12 marks)(b) Prepare the Suspense Account to correct the above errors. (5 marks)(c) Calculate the revised net profit for the year ended 31 January 2008 by showing the effects of theabove adjustments.(6 marks)(d) What is meant by the term ‘errors of reversal’? Give an example to support your answer.(2 marks)
(Total 25 marks)