Topic: Correction of errors

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FA – Nov 2024 – L1 – Q3a – Correction of Errors

Identify and correct accounting errors using journal entries, suspense account, and revised profit calculations.

Question

The trial balance for Aboadze Ltd for the year ended 31 December 2022 failed to agree, showing a difference of GH¢3,600, which was credited to the suspense account. The draft account reported a net profit of GH¢435,000.

During 2023, the following errors were identified:

GH¢30,000 received from the sale of old machinery was incorrectly recorded in the sales account.
The purchase day book was overstated by GH¢48,000.
A private purchase by the director worth GH¢36,000 was included in the company’s purchases.
Bank charges of GH¢14,400 were recorded in the cash book but not posted to the bank charges account.
A sale of GH¢207,000 to Kofi was correctly entered in the sales day book but posted as GH¢270,000 in the personal account.
Discount received of GH¢13,500 was incorrectly posted to the debit side of the discount allowed account.
Wages of GH¢120,000 paid were not posted from the cash book.

Required:

i) Show the journal entries to correct the errors.

ii) Write up the suspense account to eliminate the errors.

iii) Prepare a statement to show the revised profit.

Answer

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Tags: Accounting Adjustments, Error Correction, Financial Statements, Journal Entries, Suspense account, Trial Balance
Level: Level 1

Topic: Correction of errors
Series: Nov 2024

FA – May 2012 – L1 – SA – Q14 – Correction of Errors

Identifying the type of error when maintenance cost is debited to the wrong account.

Question

The amount of N500,000 for the maintenance of the factory machine was debited to the Plant and Machinery account after crediting the bank account with the same amount. Which error has been committed?

A. Complete reversal of entries
B. Error of commission
C. Error of original entry
D. Error of omission
E. Error of principle

Answer

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Tags: Error Correction, Maintenance Cost, Principle
Level: Level 1

Topic: Correction of errors
Series: MAY 2012

FA – Nov 2020 – L1 – SB – Q3b – Correction of Errors

Provide journal entries to correct errors and prepare a suspense account.

Question

Your subordinate in POP-Two Ventures, an inexperienced bookkeeper, has informed you that the trial balance failed to agree by a difference of N170,000, recorded on the credit side of a suspense account. After investigating, you discovered the following errors:

Errors	Amount (N’000)
Cash payment debited to the bank cash book	360
Overcasting of sales	700
Overcasting of purchases	700
Returns inwards omitted from the books	380
Bank charges posted into the cash book without a corresponding entry elsewhere	370
Opening receivables balance brought down incorrectly	180
PPE sold, credited to sales account instead of the correct account	5,000

Required:

i. Effect the necessary corrections by means of journal entries (11 Marks)
ii. Prepare the suspense account (4 Marks)

(Total 15 Marks)

Answer

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Tags: Financial Corrections, Journal Entries, Suspense Accounts, Trial Balance Errors
Level: Level 1

Topic: Correction of errors
Series: NOV 2020

FA – Nov 2020 – L1 – SA – Q16 – Correction of Errors

Identifies the correct journal entry to fix a sales/purchase misposting.

Question

Jone Bosco has credit facility with a local trade supplier. A purchase invoice was credited to the supplier’s account and debited to the sales account.

Which of the following journal entries will correct the error?

Account to be Debited	Account to be Credited
A. Sales	Supplier
B. Sales	Purchases
C. Sales	Payables
D. Purchases	Sales
E. Supplier	Sales

Answer

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Tags: Error Correction, Journal Entries
Level: Level 1

Topic: Correction of errors
Series: NOV 2020

FA – Nov 2012 – L1 – SB – Q6 – Correction of errors

Prepare the Royalty Account, Donald’s Account, and the Short Working Recoverable Account.

Question

Maxwell acquired the rights to run a quarry from a parcel of land owned by Donald. The agreement provided for:
i. Payment of royalty of N40 per tonne of granite quarried;
ii. A minimum payment of N2,000,000 per annum; and
iii. The right to recoup (for short workings) is to be extinguished at the end of the third year.

During the first four years of the contract, the following quantities of granite were produced:

Year	Tonnes Produced
2008	40,000
2009	48,000
2010	54,000
2011	56,000

Maxwell’s accounting year ends on 31 December, and payment to Donald is made on 1 January following the year-end.

Required:
a. Prepare the Royalty Account (3 Marks)
b. Prepare Donald’s Account (7 Marks)
c. Prepare the Short Working Recoverable Account (5 Marks)

Answer

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Tags: Financial Statements, Quarry Operations, Royalties, Short Working
Level: Level 1

Topic: Correction of errors
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q35 – Correction of Errors

Determine the effect of inventory understatement on profits for two years.

Question

In preparing a company’s financial statements for the year ended 30 September 2012, it was discovered that the company’s closing inventory was understated by N450,000. If the error remains uncorrected, the effect of this on the profits for 2012 and 2013 will be?

Answer

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Tags: Error Correction, Inventory, Profit
Level: Level 1

Topic: Correction of errors
Series: NOV 2012

FA – May 2013 – L1 – SA – Q13 – Correction of Errors

This question deals with correcting an accounting error related to partner’s drawings.

Question

The repairs of the personal vehicle of a partner’s wife were wrongly treated as part of motor vehicle expenses of the partnership. Which of the following accounting entries is required to correct the error?

Debit | Credit
A. Partner’s Drawings Account | Motor vehicle expenses account
B. Motor vehicle expenses account | Partner’s current account
C. Motor vehicle expenses account | Partner’s drawings account
D. Motor vehicle expenses account | Partner’s current account
E. Partner’s capital account | Motor vehicle expenses account

Answer

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Tags: Accounting Errors, Partner’s Drawings
Level: Level 1

Topic: Correction of errors
Series: MAY 2013

FA – May 2014 – L1 – SA – Q2 – Correction of Errors

Suspense account entries and explanation of the effects of errors on accounts and profit.

Question

The bookkeeper of Jafola Ltd, having been unable to agree the trial balance as at 31 January 2013, raised a Suspense Account in which he entered the difference. Consequently, he prepared a draft Statement of Financial Position to reflect the amount in the Suspense Account.

On investigation, the following errors were discovered:

i. The addition of the analysis column in the tabular purchase journal posted to goods purchased for resale account was found to be under-cast by N15,000, though the addition of the total column was correct.
ii. Goods bought from a supplier amounting to N5,250 had been posted to the credit of his account as N55,000.
iii. A dishonoured bill of exchange receivable for N200,000 returned by the Company’s bank had been credited to the bank account and debited to bills receivable account.
iv. An item of N10,500 entered in the sales returns book was posted to the debit of the customer who returned the goods.
v. Sundry items of plant sold amounting to N300,000 were posted to the sales day book, the total of which had been posted to the credit of the sales account.
vi. A sum of N60,000 owed by a customer was omitted from the schedule of sundry receivables.
vii. Discounts amounting to N2,250 allowed to a customer were duly entered in his account but not posted to the discounts allowed account.
viii. An amount of N45,000 being tenement rates paid in advance in the previous year was not brought forward as a balance on the tenement rates account.

You are required to:

a. Show the Suspense Account as raised by the bookkeeper with the adjusting entries. (5 Marks)

b. Explain the effect the above errors would have on the profit shown in the accounts (if not rectified) and on the total accounts. Assume the purchase and sales ledgers to be self-balancing. (10 Marks)

Answer

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Tags: Accounting Adjustments, Correction of Errors, Suspense account
Level: Level 1

Topic: Correction of errors
Series: MAY 2014

FA – May 2014 – L1 – SA – Q6 – Correcting Errors

Corrects an error in recording machinery purchase.

Question

A company purchased machinery for ₦900,000. The company’s Accountant recorded the transaction in the company’s books by debiting the Purchases Account instead of debiting a Non-Current Asset Account. Raise journal entries to correct the error.

Answer

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Tags: Error Correction, Non-current Assets, Purchases
Level: Level 1

Topic: Correction of errors
Series: MAY 2014

FA – May 2014 – L1 – SA – Q20 – Correction of errors

Determines the missing amount in the partner’s current account.

Question

What is the value of the item in the Current Account marked “X”?
A. ₦8,700
B. ₦13,060
C. ₦15,700
D. ₦16,000
E. ₦17,400

Answer

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Tags: Accounting Entries, Corrections, Current Account, Partnership
Level: Level 1

Topic: Correction of errors
Series: MAY 2014

FA – Nov 2018 – L1 – Q1 – Bank reconciliations | Correction of errors

Correct errors using a suspense account and prepare a bank reconciliation statement.

Question

a) State and explain TWO (2) errors that will not affect the balancing of the trial balance. (4 marks)

b) The trial balance of Pak Ltd has an excess of credit over debit of GH¢12,500. A suspense account has been opened to balance the accounts. The following transactions were later discovered:
i) Interest paid of GH¢5,000 and Interest received of GH¢8,000 have both been entered on the wrong side of the trial balance.
ii) The receivable control account balance of GH¢224,387 had been included in the trial balance as GH¢242,387.
iii) Sales of GH¢2,000 had been omitted from the sales records (i.e., from the sales day book).
iv) Purchase of raw material of GH¢4,005 was entered in the purchase account as GH¢4,500.
v) The balance on the current account with the Proprietor’s wife had been omitted from the trial balance. This item when corrected will clear the suspense account.

Required:
Open a suspense account and correct the above transactions in it. (6 marks)

c) ABC Ltd has prepared its October 2018 bank reconciliation for auditors to review. As at 31 October 2018 the ledger balance was GH¢2,450 (Credit) but the bank statement showed that the company has funds amounting to GH¢3,743.

The following are useful information:

The company arranged for the bank to transfer the dollar equivalent of GH¢500,000 to a supplier in the United States. Charges on the transfer of 0.5% have not been recorded in the books of ABC Ltd.
The CEO of ABC Ltd arranged for an amount of GH¢3,000 to be transferred from his personal bank account into the company’s account. The bank made the transfer on 31 October 2018, but ABC Ltd has not made any entry in its books.
A Cheque for Electricity Company amounting to GH¢5,600 issued and recorded correctly in the bank statements appeared in ABC ledger as GH¢6,500.
The following cheques issued by ABC Ltd in October 2018 did not appear on the bank statement:
Cheque # 00450 – GH¢2,000
Cheque # 00456 – GH¢4,800
Cheque # 00500 – GH¢5,250
Three cheques received and booked by ABC Ltd amounting to GH¢4,800 were not credited by the bank.
Income earned on investment with an advice by the bank of GH¢2,457 was not recorded by the bank until 3 November 2018.

Required:
i) Prepare the bank account in ABC Ltd nominal ledger including any adjusting entries based on the information above. (5 marks)
ii) Prepare a reconciliation of the bank statement balance to the corrected balance on the bank account in ABC Ltd nominal ledger. (5 marks)

Answer

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Tags: Bank Reconciliation, Errors in accounting, Suspense account
Level: Level 1

Topic: Bank reconciliations, Correction of errors
Series: NOV 2018

FA – May 2018 – L1 – Q3 – Bank reconciliations | Correction of errors

Identify errors not affecting the suspense account and prepare a bank reconciliation statement.

Question

a) When there is a difference in a trial balance, a suspense account is opened with the amount of the difference so that the trial balance agrees (pending the discovery and correction of the errors causing the difference). This is the only time an entry is made in the records without a corresponding entry elsewhere. Not all types of errors affect the balancing of the records and the suspense account.

Required:
Identify and explain THREE errors that do not affect the suspense account. (6 marks)

b) The Bank Account in the books of Akwatia Ltd for the month of October 2017 was as follows:

The following is the bank statement for Akwatia Ltd for the month of October 2017

The bank has confirmed to Akwatia Ltd that it made errors in Akwatia’s bank account on 6 October 2017 and 21 October 2017 amounting to GH¢950 and GH¢600, respectively.

Required:
Prepare the bank reconciliation statement for Akwatia Ltd as at 31 October 2017. (14 marks)

Answer

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Tags: Bank Reconciliation, Errors in accounting, Suspense account
Level: Level 1

Topic: Bank reconciliations, Correction of errors
Series: MAY 2018

FA – Nov 2017 – L1 – Q3 – Correction of errors

Identification and correction of errors in the trial balance for AB Ltd, including suspense account adjustments, corrected profit or loss, and balance reconciliation.

Question

The trial balance drawn up for the year ended 31 December 2016 for AB Ltd failed to agree with a difference of GH¢7,200. The difference was credited to the suspense account pending investigations.

During 2017 the following errors were identified:

GH¢10,000 received from the sale of old machinery has been entered in the sales account.
The purchase day book has been overstated by GH¢16,000.
Goods taken by the owner for personal use GH¢12,000 have not been recorded.
Bank charges of GH¢4,800 have not been entered in the cash book.
A discount allowed of GH¢4,500 has been debited to discount received account.
The figure for wages in the trial balance, GH¢40,000, has been entered as GH¢4,000.
A cheque payment of GH¢24,000 for stationery has been debited to the purchase account.

Required:

Prepare the necessary journal entries to correct the errors above. (8 marks)
Draw up the suspense account after correcting the errors. (3 marks)
Prepare the corrected profit or loss account for AB Ltd for the year ended 31 December 2016. (3 marks)

b) The cash book of Lexis Limited as at 31 December 2016 discloses a balance of GH¢18,450
which did not agree with the bank statement balance. Investigation revealed the following:
 Cheques received of GH¢52,000, GH¢5,000 and GH¢12,450 were still in the business drawer.
 GH¢1,200 and GH¢1,800 standing orders for the payment of Electricity charges and Insurance
respectively were paid by the bank but this has not been recorded in the cash book of Lexis
Limited.
 The bank charged GH¢150 for a cheque book issued to Lexis Ltd.
 The bank has wrongly debited a cheque of GH¢4,955 into Lexis Ltd account which should
have been placed in another customers account.
 A credit transfer of GH¢5,000 had been made in favour of Lexis Ltd. The transfer has not been
recorded in the cash book.
 A cheque of GH¢70,000 drawn by Lexis limited was correctly entered in the cash book but
debited to the bank statement as GH¢7,000
 The following cheques which were paid in November 2016 had not been presented :
GH¢
00001142: 2,000
00001168: 5,000
00001190: 4,655

Required:
Prepare
i) The adjusted cash book
ii) A statement to reconcile the balance in (i) above to the bank statement balance

Answer

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Tags: Cash Book, sales account, Trial Balance
Level: Level 1

Topic: Correction of errors
Series: NOV 2017

FA – May 2017 – L1 – Q4 – Correction of errors | Non-current assets and depreciation

Differences between companies and partnerships, disadvantages of sole proprietorships, depreciation calculation for Otiko Ltd, and error correction for WD.

Question

a) Partnerships and limited liability companies present several similarities for business owners looking for the right company structure. Both have similar income distribution and tax-reporting formats, and both are simpler to set up and operate than a corporation. Despite their similarities, they have differences.

Required:
Identify and explain THREE fundamental differences between a company and a partnership. (6 marks)

b) Sole proprietorships are the smallest form of business organization, and also the most common in the country. However, while there are certain advantages (it is easier to set up a sole proprietorship than a limited liability company, for instance), there are numerous disadvantages.

Required:
State FOUR disadvantages of the sole proprietorship as a mode of business. (4 marks)

c) Otiko Ltd’s head office building is the only building it owns. Using professional valuers, it revalued this building on 1 January 2016, at GH¢2,100,000. Otiko Ltd has adopted a revaluation policy for buildings from this valuation date and has decided that the original useful life of buildings has not changed as a result of the revaluation. The building was acquired on 1 January 2006. The cost of the building on acquisition was GH¢2,500,000 and the accumulated depreciation to the 31 December 2015 amounted to GH¢500,000. The depreciation up to 1 January 2016 was depreciated evenly since acquisition. The professional valuer believes that the residual value on the building would be GH¢600,000 at the end of its useful life.

Required:
Calculate the depreciation amount of the building for the year ended 31 December 2016 based on the information provided in the above scenario. (6 marks)

d) WD noted in 2016 that in 2015 it had omitted to record a depreciation expense on an asset amounting to GH¢600. Its accounts before the correction of the error are;

	2016 (GH¢000)	2015 (GH¢000)
Gross profit	6,000	6,900
Distribution costs	(600)	(600)
Administration expenses	(1,800)	(1,800)
Depreciation	(600)	Nil
Profit from operations	3,000	4,500
Income tax	(600)	(900)
Net profit	2,400	3,600

WD’s retained earnings (income surplus) for the two years before the correction of the error were;

	2016 (GH¢000)	2015 (GH¢000)
Retained earnings carried forward	6,900	4,500
Retained earnings brought forward	4,500	900

Required: Describe how the above error should be corrected in accordance with IAS 8: Accounting policies, changes in accounting estimates and errors. (4 marks)

Answer

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Tags: Depreciation, Error Correction, IAS 8, Limited Liability Companies, Partnerships, Sole Proprietorships
Level: Level 1

Topic: Correction of errors, Non-current assets and depreciation
Series: MAY 2017

FA – Nov 2016 – L1 – Q4 – Correction of errors | Preparation of limited liability company financial statements

Correcting errors in the trial balance and preparing financial statements for Adom Providers Ltd.

Question

The accountant of Adom Providers Ltd has begun preparing financial statements for the year ended 31st December 2015, but the work is not yet complete. At this stage, the items included in the trial balance are as follows:

	GHȼ’000	GHȼ’000
Land	150
Buildings	160
Motor vehicles	130
Accumulated depreciation		220
Share capital		100
Retained earnings		80
Receivables	80
Payables		60
Inventories	50
Operating profit		40
Debentures (15%)		80
Allowance for receivables		5
Bank balance (asset)	12
Suspense	3
	585	585

The following additional information is relevant: i) Sales for the year ended 31st December 2015 had been overcast by GHȼ2,300. ii) A credit note for GHȼ3,500 for goods returned to Abu, a supplier, had not been posted to the supplier’s account. iii) Discounts received of GHȼ1,400 had been posted to the debit side of the discounts allowed account. iv) A credit purchase from Manu of GHȼ640 had not been entered in the books. v) A new motor vehicle purchased for GHȼ14,000 had been recorded as a motor expense. Depreciation has been correctly entered in the accounts. vi) The debentures were issued three months before the year end. No entries have been made as regards interest. vii) A dividend of 5 per cent of share capital was declared before the year end, but not paid until after the year end.

Required:

a) Prepare journal entries with narratives to correct each of the errors in notes (i) to (v) above. (7 marks)

b) Prepare a statement to show the revised operating profit. (4 marks)

c) Prepare for Adom Providers Ltd for the year ended 31st December 2015:

i) Statement of profit or loss for the year. (2 marks)
ii) Statement of Financial Position for the year end. (7 marks)

Answer

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Tags: Error Correction, Financial Statements, Journal Entries, Trial Balance
Level: Level 1

Topic: Correction of errors, Preparation of limited liability company financial statements
Series: NOV 2016

Topic: Correction of errors

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FA – Nov 2024 – L1 – Q3a – Correction of Errors

Identify and correct accounting errors using journal entries, suspense account, and revised profit calculations.

Required:

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FA – May 2012 – L1 – SA – Q14 – Correction of Errors

Identifying the type of error when maintenance cost is debited to the wrong account.

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FA – Nov 2020 – L1 – SB – Q3b – Correction of Errors

Provide journal entries to correct errors and prepare a suspense account.

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FA – Nov 2020 – L1 – SA – Q16 – Correction of Errors

Identifies the correct journal entry to fix a sales/purchase misposting.

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FA – Nov 2012 – L1 – SB – Q6 – Correction of errors

Prepare the Royalty Account, Donald’s Account, and the Short Working Recoverable Account.

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FA – Nov 2012 – L1 – SB – Q35 – Correction of Errors

Determine the effect of inventory understatement on profits for two years.

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FA – May 2013 – L1 – SA – Q13 – Correction of Errors

This question deals with correcting an accounting error related to partner’s drawings.

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FA – May 2014 – L1 – SA – Q2 – Correction of Errors

Suspense account entries and explanation of the effects of errors on accounts and profit.

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FA – May 2014 – L1 – SA – Q6 – Correcting Errors

Corrects an error in recording machinery purchase.

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FA – May 2014 – L1 – SA – Q20 – Correction of errors

Determines the missing amount in the partner’s current account.

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FA – Nov 2018 – L1 – Q1 – Bank reconciliations | Correction of errors

Correct errors using a suspense account and prepare a bank reconciliation statement.

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FA – May 2018 – L1 – Q3 – Bank reconciliations | Correction of errors

Identify errors not affecting the suspense account and prepare a bank reconciliation statement.

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FA – Nov 2017 – L1 – Q3 – Correction of errors

Identification and correction of errors in the trial balance for AB Ltd, including suspense account adjustments, corrected profit or loss, and balance reconciliation.

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FA – May 2017 – L1 – Q4 – Correction of errors | Non-current assets and depreciation

Differences between companies and partnerships, disadvantages of sole proprietorships, depreciation calculation for Otiko Ltd, and error correction for WD.

You're reporting an error for "FA – May 2017 – L1 – Q4 – Correction of errors | Non-current assets and depreciation"

FA – Nov 2016 – L1 – Q4 – Correction of errors | Preparation of limited liability company financial statements

Correcting errors in the trial balance and preparing financial statements for Adom Providers Ltd.

You're reporting an error for "FA – Nov 2016 – L1 – Q4 – Correction of errors | Preparation of limited liability company financial statements"

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