Journal Corrections

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi Guys,
I need some help cause I am having a mental block at the moment. On working on a sim, I did all of the steps in the order dictated.
1) Write up the books for the nominal ledger as well as the individual sales and purchases ledgers for 3 months ending 31/03.
2) Close the accounts and extract a preliminary trial balance
3) Write out the necessary journal entries for the necessary corrections indicated by errors listed below:
a) Rates were incorrectly recorded as 360 in the cashbook instead of 306.
b) Bank charges not included in the cash book, but on bank statement of £30 for March
c) One of the credit customers made a payment taking advantage of a 10% discount which is not recorded in the cash book
d) one of the credit customers was declared bankrupt
e) 60 of the £600 paid as repairs in February was actually in respect of the purchase of a 2nd hand typewriter.

The ones I am stuck on are b & e. Can someone help me with the journal entries for these? They do not have an account set up for bank charges/interest so I know to credit bank account, but what do I debit? Nor do they ask anywhere for me to do a bank reconciliation.

Please help!!!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections
    ...The ones I am stuck on are b & e. Can someone help me with the journal entries for these? They do not have an account set up for bank charges/interest...
    I don't see any problem in using A new account as you mentioned above. It may just mean that the company didn't have them set up in their accounts because they were not being charged before.
    Eventhough a typrwriter may last as long as anyother fixed asset, the amount involved suggestes that it can be treated as a revenue expenditure. You can Debit your Office/stationary a/c and take it out of the Repairs a/c.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    Perhaps you have an account just called interest? Thinking about it does bank charges and/or overdraft charges get posted to interest or a seperate administrative account?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    would you not debit the cash book as it's part of the double entry
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    Lynmi if its bank charges then you would credit the cash book, which he's already stated. The question is what account to debit the bank charge expense to (i think anyway!)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    I do know to credit the bank account. Should I then just set up another t account for interest? Do I just use the next code on the code list as the sim already gives me a list of accounts set up. They couldn't make the sim any clearer could they? Should have known being BPP - haha
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    Oh - I forgot to mention that the preliminary trial balance I drew up before the journal corrections did not balance as I figured it wouldn't. I assume once the corrections are made, that my balance should tie out then?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    I asked BPP about this particular question and their answer was to debit either interest charges or a general expenses account. Neither one of those is listed on the company chart of accounts. They also told me they cannot help with other sims from other companies if you are doing them for extra practice. The only account I can see possibly using is the subsistence account, but that doesn't make any sense. WOuld you just open a brand new account and assign the next account code to it?

    Sorry for being a pest, this one is driving my batty!

    Amy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    Would you not transfer the trial balance difference into a suspence account, and make the other side of the double entry into the suspence account? Once all of the errors have been corrected the suspence account should balance, which will correct the trial balance.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    I am planning on doing that. HOwever, that still leaves with nowhere to post the interest charges in the journal corrections in order to clear the suspense account.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Journal Corrections

    I think that I would be inclinded to do as you say and make the next code in the sequence to either interest or bank charges and debit bank account. If they can't make it more obvious then what else can you do?!!

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