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Chapter 7 Answer
Chapter 7 Answer
1. $50 cash spent on stationery was entered in the cash book but not in the stationery account.
2. The sales journal was undercast by $1000.
3. $240 received from Abdul Ahmed, a customer, had been credited to the account of Abdulla
Ahmed, another customer, in the sales ledger.
4. The total of the discount received column in the cash book of $14 had been debited to the
discount allowed account in the general ledger.
5. $95 cash paid to Joe Jones, a trade creditor, had been credited to his account in the purchases
ledger.
(a) Prepare the entries in Maria Matsa’s journal to correct the above errors.
(b) Prepare the suspense account in Maria Matsa’s ledger to show the required amendments.
Start with the balance arising from the difference on the trial balance.
(c) For each error 1–5 state how the draft net profit will be affected when the errors are corrected.
If the error does not affect the draft net profit, write ‘no effect’.
Error 1
Error 2
Error 3
Error 4
Error 5
(a) Prepare the entries in Amina Nawaz’s journal to correct the above errors.
(b) Prepare the suspense account in Amina Nawaz’s ledger to show the required amendments.
Start with the balance arising from the difference on the trial balance.
(c) Using your answer to (b) state whether you consider that all the errors on Amina’s books have
been discovered. Give a reason for your answer.
Amina Nawaz has a large number of debtors. She is considering preparing monthly control
accounts for her sales ledger. She believes that this will help to locate errors if the trial balance
fails to balance.
REQUIRED
(d) State three advantages to Amina of preparing a sales ledger control account other than the
location of errors.
(e) Explain what is meant by a contra entry in connection with control accounts.
(f) State where the following items will appear in a sales ledger control account. If the item will not
appear in a sales ledger control account write “No entry”.
Ans:
(c) Answer to be based on answer to (b) – (d) Advantages of preparing a sales ledger
If (b) shows a closing balance – control account
No (1) Provides instant total of debtors. Proves the
If all the errors has been discovered the arithmetical accuracy of sales ledger.
suspense account would be closed (1) Enables the Balance Sheet to be prepared
If (b) shows the account is closed – quickly. Provides a summary of the
Yes (1) transactions relating to debtors for the
It is likely that the errors have been discovered period. Provides an internal check on the
as the suspense account is closed (1) sales ledger – may reduce fraud
(e) A contra entry is where a transfer is made from an account of a person/business in the sales
ledger to an account of the same person/business in the purchases ledger. This may occur when
a person/business is both a customer and a supplier.
(f) (ii) credit (iii) no entry (iv) debit
3 (a) When is it necessary to open a suspense account?
(b) On checking his sales ledger, a trader found the following errors had been made.
1. Cash received from Tarek El Sayed was correctly entered in the cash book but had been
credited to the account of Tarek El Sherif.
2. A cheque received from Susan Zafar was correctly entered in the cash book but had been
debited to Susan Zafar’s account.
Only one of the above errors will require a correcting entry in the suspense account.
State which one and give a reason for your answer.
(c) Mary Manake is a sole trader. She has very little knowledge of bookkeeping, but attempted to
prepare a trial balance and a set of final accounts.
The Balance Sheet she prepared is shown on the following page.