Error Question 4

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4 Nadia is a trader. Her financial year ends on 31 March. She extracted a trial balance at 31 March
2020. The debit and credit totals did not agree. The difference was entered into a suspense
account.

After Nadia prepared draft financial statements, she discovered the following errors.

1 The purchases account was overcast by $110.

2 $13 for discount allowed in February 2020 had been credited to the discount allowed account
as $15.

3 A payment for insurance, $220, was correctly recorded in the cash book, but was recorded as
$202 in the insurance account.

4 Commission received, $65, had been debited to the account for commission payable. The
entry to the cash book had been correctly made.

5 Cash drawings, $85, were correctly entered in the cash book but were credited to the
drawings account.

6 The cost of a vehicle repair, $190, had been debited to the motor vehicles account.

7 A payment of $100 to Robert had been posted to the account of Roberta.

REQUIRED

(a) Prepare the suspense account. Include the original difference on the trial balance as a
balancing figure.

Nadia
Suspense account

Date Details $ Date Details $

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..

………. .……………………… ……….. ………. .……………………… ………..


[7]

© UCLES 2020 0452/23/M/J/20


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(b) Identify the type of error made in

(i) Error 6

...................................................................................................................................... [1]

(ii) Error 7

...................................................................................................................................... [1]

(c) Complete the following statement to show the effect on the profit for the year of correcting
errors 2–7. If there is no effect on profit write ‘nil’ in the ‘no effect’ column. Calculate the
corrected profit for the year. Ignore depreciation of non-current assets.

The first correction has been completed as an example.

Nadia
Statement of corrected profit for the year ended 31 March 2020
$
Draft profit for the year before corrections 6720
No Increase Decrease
Effect in profit in profit
$ $

Error 1 110

Error 2 ............... ............... ...............

Error 3 ............... ............... ...............

Error 4 ............... ............... ...............

Error 5 ............... ............... ...............

Error 6 ............... ............... ...............

Error 7 ............... ............... ...............

Corrected profit for the year [7]

© UCLES 2020 0452/23/M/J/20 [Turn over


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At 31 March 2020 Nadia’s trade receivables owed $14 500. After the preparation of the draft
financial statements for the year ended 31 March 2020, Nadia discovered the following.

1 $300 owed by DD Supplies should have been written off as irrecoverable.

2 A provision of doubtful debts of 2% of trade receivables should have been created.

REQUIRED

(d) Prepare journal entries to record 1 and 2 above. Narratives are not required.

Nadia
Journal

Date Details Debit Credit


$ $

……….. ……………………………………………........... ……………… ………………

……….. ……………………………………………........... ……………… ………………

……….. ……………………………………………........... ……………… ………………

……….. ……………………………………………........... ……………… ………………

……….. ……………………………………………........... ……………… ………………

………… ……………………………………………........... ……………… ………………

[4]

[Total: 20]

© UCLES 2020 0452/23/M/J/20

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