CHAPTER 4
Question 11 The Trial Balance of Furn’s Ltd, a furniture shop owner, failed to agree on 31/12/2013. The difference was entered in a Suspense Account and the following Balance Sheet was prepared:
Fixed Assets Premises
Balance Sheet as at 31/12/2013 €
Motor Vehicles Equipment
Current Assets Stock (including suspense) Debtors Cash
less: Current Liabilities Creditors Bank
Financed By: Capital
add: Net Profit Drawings
Capital Employed 18,000
2,000 (20,000) 202,600 457,600
250,000 220,000
(12,400) 457,600
On checking the books, the following errors were discovered: (i) Furn’s Ltd had returned furniture purchased on credit for €5,000 from a creditor. Furn’s Ltd entered this return as €5,500 on the correct side in the correct accounts. A credit note arrived shortly afterwards showing a restocking charge of €150 to cover the cost of the return. The only entry made in respect of this credit note was a credit of €4,850 in the creditors account.
(ii) Equipment purchased on credit from Equip stores for €2,500 had been entered as €25,500 on the incorrect side of the creditors account and credited as €2,500 in the purchases account.
(iii) Furn’s Ltd won a private holiday valued at €6,000 in a draw. Furn’s Ltd used this prize to offset against a business debt of €5,000. No entry had been made in the books.
(iv) Cash payments of €100 for repairs to display furniture had been credited to the purchases account and also €200 debited to the bank account.
(v) €2,000 in cash was received from the sale of equipment (book value €2,500). No entry had been made in the books in respect to this transaction.
You are required to: (a) Journalise the necessary corrections. (b) Show the Suspense Account. (c) Prepare a Statement showing correct net profit. (d) Prepare a corrected Balance Sheet.
Private holiday is capital introduced. It affects the books as this is what the company owes.
4 €
175,000 55,000
25,000 255,000
200,000 15,000 7,600
222,600 €
51
TIP
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