The bookkeeper of a firm failed to agree the trial balance at 30 June, the end of the financial year. She opened a suspense account into which she entered the amount she was out of balance and carried this amount to a draft balance sheet which she prepared.

The following errors were subsequently discovered in the books:

(i) The purchase day book had been undercast by £10.

(ii) Goods bought on credit from A Supplier for £5 had been posted to his account as £50.

(iii) A new machine costing £70 had been posted to the debit of the repairs to machinery account.

(iv) S Kane, a customer, returned goods valued at £10. This had been entered in the sales returns day book and posted to the debit of the customer’s account.

(v) The sale on credit of various items of plant and machinery at their book value of £300 had been recorded in the sales day book.

(vi) £60 owed by D Clarke, a customer, had been overlooked when drawing up a schedule of sundry debtors from the ledger.

(vii) An item of cash discount allowed £2 had been correctly entered in the cash book but had not been posted to the account of B Luckwood, the customer.

(viii) Business rates, treated as having been paid in advance in the previous accounting period, amounting to £45 had not been brought down as a balance on the business rates account at the start of the accounting period. Instead it was included in the prepayments account.

As a result of posting these errors to the suspense account, the balance on the suspense account was reduced to zero.

Required:

(a) Prepare the suspense account, including the initial opening entry made by the bookkeeper, along with all the necessary adjusting entries identified above.

(b) Explain clearly the effect of correcting the above errors:

(i) on the net profit shown in the draft profit and loss account

(ii) on any of the items in the draft balance sheet