1
Chi Knitwear Ltd is an old-fashioned business with a handwritten set of books. A trial balance
is extracted at the end of each month, and a profit and loss account and balance sheet are computed.
This month, however, the trial balance will not balance, the credits exceeding debits by £1,536.
You are asked to help and after inspection of the ledgers discover the following errors.
(i) A balance of £87 on a debtor’s account has been omitted from the schedule of debtors, the
total of which was entered as debtors in the trial balance.
(ii) A small piece of machinery purchased for £1,200 had been written off to repairs.
(iii) The receipts side of the cash book had been undercast by £720.
(iv) The total of one page of the sales day book had been carried forward as £8,154 whereas the
correct amount was £8,514.
(v) A credit note for £179 received from a supplier had been posted to the wrong side of his
account.
(vi) An electricity bill in the sum of £152, not yet accrued for, is discovered in a filing tray.
(vii) Mr Smith, whose past debts to the company had been the subject of a provision, at last paid
£731 to clear his account. His personal account has been credited but the cheque has not yet
passed through the cash book.
Required:
(a) Write up the suspense account to clear the difference, and
(b) State the effect on the accounts of correcting each error.
(Association of Chartered Certified Accountants)