Question

As an accountant of a company, you are disappointed to learn that the totals in your new trial balance are not equal. After going through a careful analysis, you have discovered only one error. Specifically, the balance of the Office Equipment account has a debit balance of ₹ 15,600 on the trial balance. However, you have figured out that a correctly recorded credit purchase of pen-drive for ₹ 3,500 was posted from the journal to the ledger with a ₹ 3,500 debit to Office Equipment and another ₹ 3,500 debit to creditors accounts.
Answer each of the following questions and present the amount of any misstatement:
(a) Is the balance of the office equipment account overstated, understated, or correctly stated in the trial balance?
(b) Is the balance of the creditors account overstated, understated, or correctly stated in the trial balance?
(c) Is the debit column total of the trial balance overstated, understated, or correctly stated?
(d) Is the credit column total of the trial balance overstated, understated, or correctly stated?
(e) If the debit column total of the trial balance is ₹ 2,40,000 before correcting the error, what is the total of credit column.

Answer 1

Pen-drive is wrongly debited to office equipment account, instead of stationery account and supplier account is debited instead of crediting.

Because of these mistakes, the following errors are committed:

a. The balance of office equipment is overstated by ₹ 3,500

b. The balance of creditors account is understated by ₹ 7,000

c. The total of the debit column of the trial balance is correctly stated.

d. The total of the credit column of the trial balance is understated by ₹ 7,000.

e. If the total of the debit column of the trial balance is ₹ 2,40,000 before rectifying error, the total of the credit column of the trial balance is ₹ 2,33,000 (i.e., ₹ 2,40,000 – ₹ 7,000).