example of rectification of errors - illustration 1

Illustration 1

Rectify the following error and find out the effect of the errors on Net Profit.

a. Purchases of Rs.300 from Raman passed through Sales Book.
b. Bill received from Ramu for Rs.500 passed through Bills Payable Book.
c. An item of Rs.150 relating to Prepaid Rent was omitted to be brought forward from last year.
d.Rs.400 paid to Mehta B, against our acceptance was debited to Mehta N.
e. Received Rs 300 from Ajit(whose account for Rs.300 was written off earlier) and posted to the credit of Amrit
f. Transistor sold to Karun for Rs.750 passed through Sales Book twice.

Solution:

	Journal Entries
		Rs.	Rs.
a.	Purchases Account Dr	300
	Sales Account Dr	300
	To Raman Account		600
	(Being the amount passed through sales book cancelled and debited to purchases book)

b.	Bills Receivable Account Dr	500
	Bills Payable Account Dr	500
	To Ramu's Account		1000
	(Being the amount cancelled passed through bills payable book and debited to bills received account)

c.	Prepaid Insurance Account Dr	150
	To Suspense Account		150
	(Being prepaid Insurance omitted to bring into books of accounts earlier, now brought into books of accounts)

d.	Bills Payable Account Dr	400
	To N. Mehta Account		400
	(Being the amount wrongly debited to N. Mehta cancelled)

e.	Ajit account Dr	300
	Amrit account Dr	300
	To Bad Debts Recovered Account		600
	(Being the amount credited to Ajit account cancelled and credited to Bad debts recovered)

f.	Sales Account Dr	750
	To Karun Account		750
	(Being wrong credit given to sales account cancelled)