The
trial balance of Mr. W & H failed to agree and the difference Rs.20,570 was
put into suspense pending investigation which disclosed that:
(i) Purchase returns day
book had been correctly entered and totalled at Rs.6,160, but had been posted
to the ledger.
(ii) Discounts received
Rs.1,320 had been debited to discounts allowed.
(iii) The Sales account
had been under added by Rs.10,000.
(iv) A credit sale of
Rs.1,470 had been debited to a customer account at Rs.1,740.
(v) A vehicle bought
originally for Rs.7,000 four years ago and depreciated to Rs.1,200 had not been
sold for Rs.1,500 in the beginning of the year but no entries, other than in
the bank account had been passed through the books.
(vi) An accrual of
Rs.560 for telephone charges had been completely omitted.
(vii) A bad debt of
Rs.1,560 had not been written off and provision for doubtful debts should
have been maintained at 10% of Trade receivables which are shown in the trial
balance at Rs.23,390 with a credit provision for bad debts at Rs.2,320.
(viii) Tools bought for
Rs.1,200 had been inadvertently debited to purchases.
(ix) The
proprietor had withdrawn, for personal use, goods worth Rs.1,960. No entries
had been made in the books
Required:
(i) Pass rectification
entries without narration to correct the above errors before preparing annual
accounts.
(ii) Prepare a statement
showing effect of rectification on the reported net profit before correction of
these errors.