QUESTION THREE The bookkeeper of Smith Ltd, having been unable to agree the trial balance as at 31 January 2019, raised a Suspense Account in which he entered the difference. Consequently, he prepared a draft Statement of Financial Position to reflect the amount in the Suspense Account On investigation, the following errors were discovered: i. The addition of the analysis column in the tabular purchase journal posted to goods purchased for resale account was found to be under-cast by GH15,000, though the addition of the total column was correct. Goods bought from a supplier amounting to GH5,250 had been posted to the credit of his account as GH55,000. ili. A dishonoured bill of exchange receivable for GH200,000 returned by the Company's bank, had been credited to the bank account and debited to bills receivable account. iv. An item of GH10,500 entered in the sales returns book was posted to the debit of the customer who returned the goods. Sundry items of plant sold amounting to GH300,000 was posted to the sales day book, the total of which had been posted to the credit of sales account. vi. A sum of GH60,000 owed by a customer was omitted from the schedule of sundry receivables. Discounts amounting to GH2,250 allowed to a customer was duly entered in his account but not posted to discounts allowed vii. An amount of GH45,000 being tenement rates paid in advance in the previous year was not brought forward as a balance on the tenement rates account. You are required to: Show the Suspense Account as raised by the book keeper with the adjusting entries. 15 Marks b. Explain the effect the above errors would have on the profit shown in the accounts (if not rectified) and on the total accounts. Assume the purchase and sales ledgers to be self- balancing. account. [10 Marks 15 [Total Marks QUESTION THREE The bookkeeper of Smith Ltd, having been unable to agree the trial balance as at 31 January 2019, raised a Suspense Account in which he entered the difference. Consequently, he prepared a draft Statement of Financial Position to reflect the amount in the Suspense Account On investigation, the following errors were discovered: i. The addition of the analysis column in the tabular purchase journal posted to goods purchased for resale account was found to be under-cast by GH15,000, though the addition of the total column was correct. Goods bought from a supplier amounting to GH5,250 had been posted to the credit of his account as GH55,000. ili. A dishonoured bill of exchange receivable for GH200,000 returned by the Company's bank, had been credited to the bank account and debited to bills receivable account. iv. An item of GH10,500 entered in the sales returns book was posted to the debit of the customer who returned the goods. Sundry items of plant sold amounting to GH300,000 was posted to the sales day book, the total of which had been posted to the credit of sales account. vi. A sum of GH60,000 owed by a customer was omitted from the schedule of sundry receivables. Discounts amounting to GH2,250 allowed to a customer was duly entered in his account but not posted to discounts allowed vii. An amount of GH45,000 being tenement rates paid in advance in the previous year was not brought forward as a balance on the tenement rates account. You are required to: Show the Suspense Account as raised by the book keeper with the adjusting entries. 15 Marks b. Explain the effect the above errors would have on the profit shown in the accounts (if not rectified) and on the total accounts. Assume the purchase and sales ledgers to be self- balancing. account. [10 Marks 15 [Total Marks
