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Trial Balance and Rectification of Errors — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountTrial Balance and Rectification of Errors6 Marks
Question
What do you mean by Suspense Account? When is it opened?
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Answer

Suspense Account: Suspense Account is the account to which the amount being the difference in trial balance is temporarily placed. If the total of debit side is short, Suspense Account will show debit balance. And if, the total of credit side is short, Suspense Account will show credit balance. The difference is placed in the Suspense Account so that final accounts are prepared without delay. As a result of this, Trial Balance will appear to agree.. However, the errors still remain in the Trial Balance which are identified and rectified.
Suspense Account is used for rectifying all One-Sided Errors: It is opened Due to errors any error in journal entries especially one-sided errors, There may be cases when Trial balance does not match i.e when the total of the debit column does not match that of the credit column, then the difference of the Trial Balance is transferred to a temporary account in order to avoid delay in preparation of the financial statements. This temporary account is termed as Suspense Account and it is prepared only in case of one-sided errors in the books of accounts.

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Prepare the Accounting Vouchers for the following transactions:?
2019
Particular
₹
Jan-1
Started business with cash
2,00,000
Jan-1
Purchased furniture vide Cash Memo No. 210*
10,000
Jan-5
Opened a Bank Account in Canara Bank
60,000
Jan-10
Purchased garments on credit from M/s Madras Store vide Bill No. 291*
20,000
Jan-12
Sold shirts to Ram Parkash on credit vide Bill No. 1*
5,000
Jan-15
Sold shirts for cash vide Cash Memo No. 1*
7,000
Jan-20
Withdrew from bank for office use by cheque No. 23301
20,000
Jan-27
Withdrew for personal use by cheque No. 51003
5,000
Transactions marked with * are subject to levy of CGST and SGST @ 6% each.
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On checking the Bank Pass Book it was found that it showed an overdraft of ₹ 5,220 as on 31st March, 2019, while as per Ledger it was different. The following differences were noted:
  1. Cheques deposited but not yet credited by the bank ₹ 6,000.
  2. Cheques dishonoured and debited by the bank but not given effect to it in the Ledger ₹ 800.
  3. Bank charges debited by the bank but Debit Memo not received from the bank ₹ 50.
  4. Interest on overdraft excess credited in the Ledger ₹ 200.
  5. Wrongly credited by the bank to account, deposit of some other party ₹ 900.
  6. Cheques issued but not presented for payment ₹ 400.
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The following balances appear in the books of Y Ltd.:

 

₹

Machinery A/c as on 1-4-2022

8,00,000

Provision for Depreciation A/c as on 1-4-2022

3,10,000


On 1-7-2022, a machinery which was purchased on 1-4-2019 for ₹ $1,20,000$ was sold for ₹ 50,000 and on the same date, another machinery was purchased for ₹ 3,20,000.
The firm has been charging depreciation at $15 \%$ p.a. on Original Cost Method and closes its books on $31^{\text {st }}$ March every year. Prepare the Machinery A/c and Provision for Depreciation $A / c$ for the year ending $31^{\text {st }}$ March 2023.

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A sells goods for ₹ 30,000 to B on 1st January, 2017 and on the same day draws a bill on B at three months for the amount. B accepts it and returns it to A, who discounts it on 4th February, 2017 with his bank at 18% per annum. The acceptance is dishonoured on the due date, the noting charges paid by the bank being ₹ 200.
On 4th April, 2017, B accepts a new bill at two months for the amount then due to Atogether with interest at 12 per cent per annum. Make Journal entries to record these transactions in the books of A and B.
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Give rectifying journal entries for the following errors:
  1. Sale of goods to Madan ₹ 6,000 were entered in the sales book as ₹ 600.
  2. A credit purchase of ₹ 1,500 from Ajay has been wrongly passed through the sales book.
  3. Repairs to building ₹ 300 were debited to building account.
  4. ₹ 2,050 paid to Rohit is posted to the debit of Mohit's account as ₹ 5,020.
  5. Purchase return book is overcast by ₹ 400.
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Rectify the following errors assuming that a suspense account was opened. Ascertain the difference in trial balance.
  1. Credit sales to Mohan ₹ 7,000 were posted to the credit of his account.
  2. Credit purchases from Rohan ₹ 9,000 were posted to the debit of his account as ₹ 6,000.
  3. Goods returned to Rakesh ₹ 4,000 were posted to the credit of his account.
  4. Goods returned from Mahesh ₹ 1,000 were posted to the debit of his account as ₹ 2,000.
  5. Cash sales ₹ 2,000 were posted to the debit of sales account as ₹ 5,000.
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Show the effect of the following transactions and also prepare a Balance Sheet:
  1. Started business with cash ₹ 60,000.
  2. Rent received ₹ 2,000.
  3. Accrued interest ₹ 500.
  4. Commission received in advance ₹ 1,000.
  5. Amount withdrawn ₹ 5,000.
[Hint: Capital = Opening Capital ₹ 60,000 + Rent Received ₹ 2,000 + Accrued Interest ₹ 500 - Drawings ₹ 5,000 = ₹ 57,500.]
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Explain the meaning and significance of “money measurement concept'.
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Rajesh Kumar was unable to reconcile his Trial Balance as on 31st March 2014 and has opened a suspense account from the difference. Later on the following errors were discovered:-
  1. There were three compensating errors:-
  1. The total of Sales Return Book was overcast by ₹ 100.
  2. The total of one page of the Purchase Book was carried forward as ₹ 1,286 instead of ₹ 1,826.
  3. Goods purchased from C for ₹ 400 was debited to his account as ₹ 40.
  1. ₹ 425 paid for wages to workmen for making office table were debited to wages account.
  2. Rent paid ₹ 1,500 were posted to the credit of Rent account as ₹ 150.
  3. Cash received from Ghanshyam ₹ 500 were correctly recorded in cash book but were posted to his account as ₹ 50.
  4. ₹ 720 paid to Kamal has been debited to Kamlesh A/c as ₹ 520.
  5. The total of Purchase Return Book ₹ 2,500 was left unposted.
Pass rectifying entries and prepare Suspense A/c.
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On which side will the increase in the following accounts be recorded? Also, state the nature of the account:
i Furniture A/c ii Mohan (proprietor)
iii Salary A/c iv Purchases A/c
v Sales A/c vi Interest Paid A/c
vii Sohan (Creditor) viii Ram (Debtor)
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