Question Three

The trial balance of Judy Mwaba failed to agree because the credit balances were more than the debit balances by K1, 350. Consequently, the suspense account was opened and after some investigations the following errors were discovered as at 31^st July 2017:

The sales day book total was listed as K1, 250 instead of K1, 520.

Discount allowed was credited to discount received K1, 050.

The purchases day book total K1, 320 had been recorded properly in the ledger but posted to the payables control twice.

Repair for furniture K560 was debited to furniture account.

Cash receipts from receivables K1, 800 was debited in the cash book but not posted to the receivables control account

Required:

(a) Describe two (2) reasons for preparing the trial balance. (2 marks)

(b) Briefly explain two (3) errors that will be revealed by the trial balance. (3 marks)

(c) Briefly explain two (5) errors that will not be revealed by the trial balance. (5 marks)

(d) Prepare:

(i) Journal entries to correct the above entries. (Narratives are required)

(5 marks)

(ii) Suspense account showing the correction of the errors (5 marks)

(e) If the net profit calculated was K12, 570 before errors were discovered, what could have been the corrected net profit after the discovery of the mistakes?

(5 marks)