Accounting · Rectification of Errors
On extracting a trial balance, a bookkeeper discovered a difference and opened a suspense account. The following errors were later found: 1. A credit sale of $850 was correctly recorded in the sales account, but the debit entry was made to the Payables account. 2. The purchase of a machine for $2,000 was recorded as: Debit Maintenance Expense $200, Credit Bank $2,000. What journal entries are required to correct these errors and what is the impact on the firm's net profit?
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- 1Dr Receivables $850, Dr Payables $850, Cr Suspense $1,700; Dr Machine $2,000, Cr Maint. Exp $200, Cr Suspense $1,800. Net Profit increases by $200.✓
- 2Dr Receivables $850, Dr Payables $850, Cr Suspense $1,700; Dr Machine $2,000, Cr Maint. Exp $200, Cr Suspense $1,800. Net Profit increases by $1,050.
- 3Dr Receivables $850, Dr Payables $850, Cr Suspense $1,700; Dr Machine $2,000, Cr Maint. Exp $200, Cr Bank $1,800. Net Profit increases by $200.
- 4Dr Receivables $850, Dr Payables $850, Cr Suspense $1,700; Dr Machine $2,000, Cr Maint. Exp $200, Cr Suspense $1,800. Net Profit decreases by $650.
Correct answer
Dr Receivables $850, Dr Payables $850, Cr Suspense $1,700; Dr Machine $2,000, Cr Maint. Exp $200, Cr Suspense $1,800. Net Profit increases by $200.
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