a) i) Give and explain four errors that are NOT disclosed by the Trial Balance.

(8marks)

ii) Explain the operation of SUSPENSE Account in the correction of errors.

(4marks)

b) The firm of Adam and Son extracted a Trial Balance from the books on 30th June 2020 and found that the credit side exceeded the debit by sh.92,000. This difference was entered into a suspense account and the final account prepared.

The following mistakes were subsequently discovered:

1. machinery repairs of sh.40,000 had been entered on the debit side of the machinery account.

2. Cash discount of sh.2000 allowed by Milele Ltd., a payable had not been entered in Milele Ltd Account.

3. The purchase of a computer for sh.320,000 had been entered in the office equipment account as sh.230,000.

4. The Sales Book had been under cast by sh.10,000.

5. Loan interest charged by the bank, sh.60,000, had been entered in the Bank account but not posted to the interest on loan account.

6. Sh.25,000 received for the sale of an old office desk had been debited in the cash book and also debited to the office equipment account.

Required:

a) Draw the journal entries required to correct these errors(ignore depreciation);

(6 marks)

b) Write up the Suspense Account; and (4marks)

c) Prepare a table similar to the one shown below indicating the effect of the correction of the above errors on assets and profit