Chapter 11 - The Journal And Correction Of Errors

Question 1

Year end transfers

Answer 1

Many non regular transactions take place at the end of a businesses financial year and need to be recorded in the journal.

Question 2

Accrual of expense in the journal

Answer 2

Debit statement of profit or loss

Credit telephone account

Debit telephone account with the accrued expense

Credit accrued expenses account

Question 3

Prepayment of expense in the journal

Answer 3

Debit statement of profit or loss

Credit rent paid

Debit prepaid expenses

Credit rent paid

Question 4

Accrual of income in the journal

Answer 4

Debit commission received

Credit statement of profit or loss

Debit accrued income

Credit commission received

Question 5

Prepayment of income in the journal

Answer 5

Debit rent received

Credit statement of profit or loss

Debit rent received

Credit prepaid income

Question 6

Depreciation charges on non current assets in the journal

Answer 6

Debit depreciation charges

Credit machinery: accumulated depreciation

The amount of depreciation charges is then recorded on the statement of profit or loss:

Debit statement of profit or loss
Credit depreciation charges account

Question 7

Irrecoverable debts in the journal

Answer 7

Debit irrecoverable debts account

Credit receivables ledger control account

At the end of the financial year the balance of irrecoverable debts account is transferred to the statement of profit or loss as follows:

Debit statement of profit or loss

Credit irrecoverable debts account

Question 8

Allowance for doubtful receivables in the journal

Answer 8

Debit allowance for doubtful receivables: adjustment account

Credit allowance for doubtful receivables account

The journal entry for the transfer to profit or loss is:

Debit statement of profit or loss

Credit allowance for doubtful receivables: adjustment

If the allowance is increased:

Debit statement of profit or loss

Credit allowance for doubtful receivables: adjustment account

Decreasing the allowance:

Debit allowance for doubtful receivables: adjustment account

Credit statement of profit or loss

Question 9

Sale of non current asset

Answer 9

Debit receivables ledger control

Credit disposals

Question 10

Errors not revealed by a trial balance

Answer 10

Error of principle, error of commission, errro of original entry, error of omission, reversal of entries

Question 11

Error of principle

Answer 11

The cost of fuel has been debited to the vehicles account. This error is corrected in the journal as follows:

Debit vehicle expenses - £50

Credit vehicles at cost - £50

Question 12

Error of commission

Answer 12

Credit sales of £60 have been debited to the account of j Adam’s instead of the account of j Adam limited. The error is corrected as follows:

Debit Receivables ledger control - £60

Credit receivables ledger control - £60

Correction of mispost in the receivables ledger: debit j Adam limited £60, credit J Adam’s £60

Question 13

Error of original entry

Answer 13

Postage’s of £45 paid from the bank have been entered in the accounts as £54. The error is corrected as follows:

Debit bank - £54
Credit postage’s - £54

Debit postage’s - £45
Credit bank - £45

Question 14

Error of omission

Answer 14

A credit sale of goods, £200 plus VAT has been completely omitted from the accounting system. The error is corrected as follows

Debit receivables ledger control - £240
Credit sales - £200
Credit vat - £40

Question 15

Reversal of entries

Answer 15

A payment from the bank of £50 to a supplier s wright has been debited in the cash book and credited to payables ledger control and wrights account in payables ledger. The error is corrected as follows:

Debit payables ledger control account - £50
Credit bank - £50

Debit payables ledger control - £50
Credit bank - £50

Question 16

Errors shown by the trial balance

Answer 16

One sided entry, entry duplicated on one side, unequal entries, account balance incorrectly transferred to the trial balance

When errors are shown the trial balance is balanced by recording the difference in a suspense account

Question 17

One sided entry

Answer 17

Telephone expenses of £55 were not recorded in the expenses account.

The corrections journal entry is:

Debit telephone expenses account - £55

Credit suspense account - £55

Question 18

Entry duplicated on one side, nothing on the other

Answer 18

Stationery expenses of £48 have been debited to both stationary account and bank account

Debit suspense account - £48
Credit bank - £48

Debit suspense account - £48
Credit bank - £48

Question 19

Unequal entries

Answer 19

£65 payment to supplier has been recorded in the bank as £56

Debit bank - £56
Credit suspense - £56
Debit suspense - £65
Credit bank - £65

Question 20

Account balance incorrectly transferred

Answer 20

The balance of rent paid account has been recorded in the trial balance as £3000, the correct balance is £3100.

Debit suspense - £3000
Credit rent paid - £3000

Debit rent paid - £3100
Credit suspense - £3100

Question 21

Suspense account

Answer 21

The suspense account will have a nil balance after all errors have been found