... trial balance. Due to errors committed by the book-keeper, the trial balance
failed to balance by Sh.369.400. He placed the difference in a suspense account as shown
below:
Tialala trial balance as at 31 December 2016
Sh. Sh.
Long-term assets 832,000
Inventory
1 January 2016 148.000
31 December 2016 98,800
Accounts receivable 76,000
Prepayments 10,000
Account payable 34.600
Bank overdraft 15,200
Accruals 16,000
Drawings 359.600
Capital 1,054,000
Sales 1,043,200
Provision for depreciation 166,400
Purchases 733
.
000
Operating expenses 126.000
Provision for doubtful debts 3,800
Discounts received 5,000
Discounts allowed 5,800
Suspense account 369
.
400
2,548 400 248 400
Investigations carried out after preparing the above trial balance detected the following
errors:
1. The total of the sales day book for December 2016 was overcast by Sh.25,700.
2. On 2 July 2016 the business purchased office equipment for Sh.40.000. These were
debited to purchases account.
3. Depreciation on the equipment is at the rate of 10% per annum on cost and based
on the period (months) of usage in the year.
4. A payment to a creditor by cheque of Sh.8.500 was erroneously credited to the creditor’s
account.
5. A payment of Sh.4.500 for telephone expenses was debited to telephone account as
Sh.5.400.
6. An amount of Sh.15.000 received from a debtor was not posted to the debtor's
account from the cash book.
7. An amount of discounts received of Sh.2.500 was debited to discounts
allowed account.
8. Purchases day book for October 2016 was undercast by Sh.28,000.
9. Assume the business had reported a net profit of Sh.85,800 before adjusting for the
above errors.
Required:
(i) Draw Journal entries to correct the above errors (Narration required) (8 marks)
(ii) Prepare Statement of corrected net profit for the year ended 31 December 2016
(6 marks)