Question 2

(a). For each of the transaction below, a mistake has been made which will not be disclosed be the preparation of a trial balance. Indicate what types of mistakes involved namely error of omission, error of commission, error of compensation, error of reversal, error of original entry or error of principle.

1. A cheque received from Boon Fatt has been recorded in Boon Cheong's account.
2. Legal fees for purchases of a new premises treated as revenue expenditure.
3. Sales invoice of $400 treated as $40
4. Stationery expenses of $50 treated as office equipment.
5. When a cash sales made, sales account been debited and cash account been credited
6. Sales invoice no 2345 never recorded into the account.
7. A recording error resulting the bank account understated by $50 whiles another mistake resulting the sales account understated by $50.

(b) James extracted a Trial Balance at 31 December 2020 and found that it did not balance. He posted the differences to a Suspense Account. Later, he found the following errors which accounted for the difference:

1. The total of $365 for the discount allowed had been posted to the credit side of discount received account.
2. A payment of $210 to James from a debtor T Hall had been posted to the credit of T Ball in error.
3. James had paid $2,640 wages and supplied materials costing $960 to his own employees in building a store beside his factory. No record had been made.
4. A payment of $56 for postage had been posted to that account as $65.
5. James purchased new fittings for his factory costing $1,800, but this transaction had been posted to the purchases account.
6. A payment by James of $96 for an electricity bill had been entered in the cash book, but the debit entry had not been made.

Required:

i.Prepare the journal entries necessary to correct the errors and omission. (Narrations are required)

ii. Prepare the Suspense Account, showing the original difference in the Trial Balance