journal

Re:journal

The postings to Sales and Sales ledger Control Account have been mixed up.

I would suggest reversing these two entries,
Dr Sales 2350
Cr SLCA 2000

Then post them as they should have been

Dr SLCA 2350
Cr Sales 2000

VAT is correct.

The narrative could be along the lines of "to reverse incorrect posting from Sales Day Book dated........ and to post the correct entry"

Hope this helps.

Re:journal

I think the correct way would be to

Dr Sales Ledger Control 350
Dr Sales 350
cr Suspense 700

Re:journal

I'm with Roy on this - while sadilatimer's logic is correct I think he/she made a mistake with the suspense a/c which should be credited with 700.

This is how I worked it:

First clear the erroneous entries:

Sales 2350 Dr
Suspense 2350 Cr

SLCA 2000 Cr
Suspense 2000 Dr

Then put in the correct entries

Sales 2000 Cr
Suspense 2000 Dr

SLCA 2350 Dr
Suspense 2350 Cr

Balancing off debits and credits we get:
Sales 2000 - 2350 = 350 Dr
SLCA 2000 - 2350 = 350 Dr
Suspense 2350 + 2350 - 2000 - 2000 = 700 Cr

Re:journal

I think in the question states that the amount have been posted as follows

dr sales ledger control account 2000
cr vat 350
cr sales 2350


this already tells us that there is an imbalance of £700 on the debit side as the total of credit side is £2700 and the total of debit side is £2000.

Therefore the £700 represents Suspense

Re:journal

Annette is correct in what she is saying. The original post was not clear as to the timing.

If a trial balance has not been extracted from the books of prime entry then there would be no way of knowing whether a suspense account or not had been created. If it was simply discovered after the event (i.e. after the day book totals had been written into the books), then Annette's answer is appropriate.

If the question says that the trial balance has been extracted and you are preparing the ETB then the suspense account must arise because the sales day books casts do not agree.

Kind regards
Steve

Re:journal

Just to add my 2p worth...

Surely whether you have actually drawn up the trial balance is irrelevant. This type of error will affect the TB and thus a suspense account will need to be created and cleared. This will clearly the case whether you have drawn up the TB or not.

Indeed, I don't see a way to correct the error without a suspense account.

Re:journal

Yes you are ALL correct. This post has turned very very confusing!!!

Annette is correct (depending on the timing). If the person who originated the entries simply noticed AT THE TIME the entry had taken place (regardless of whether a trial balance had been extracted or not) then the journal would simply be to reverse them. In a manual system you can EASILY post an imbalanced journal manually.

If the above is simply an extract FROM THE WHOLE QUESTION. Then a suspense account WILL ALREADY be raised as the journal previously entered will contain an imbalance, the correcting entry of course being posted to the suspense account i.e. the original debit to the suspense will be credited out on correction.

I think the problem here is how the original query is being interpreted. I can see it from both perspectives.

Kind regards
Steve

Re:journal

Ouch - I don't envy you Chris.

It's a long, long time since I did manual bookkeeping. However, you can enter as many incorrect figures as you like in a manual system - it is only when you come to close those figures off to balance the "T" accounts in order to write up the TB that you will notice the error(s). This is what Annette was saying which I can see.

The others are saying (quite correctly) that the TB will balance because a suspense account has been opened to take the difference in the sales day book postings. This is also correct down to the timing which I'll explain as follows:

In Annette's answer, she has NOT closed the books off and therefore the error is simply a reversal.

In Roy's answer he has closed the books off and done the initial trial balance.

My diagnosis of the confusion is in the original thread. It didn't refer to the books either being closed off or not. The majority is, however, that the books have been closed and the trial balance has been prepared.

Phew - is it too early to go to the pub!

Re:journal

Ah, OK I get it now

I suspect some of the confusion stems from is the familiarity with the the of questions set to assess a student's ability with journals. It's been a while since I studied error correction but I think that most (if not all) questions assume that accounts are closed where obviously in the real-world of accounting (if that's not an oxymoron)they can, of course, be either.

I've done quite a few of these sort of tasks in my time and don't notice the ambiguity - it's a case of knowing what they're after here. This of course can limit your appreciation of the finer points of accounting practices involved but it makes life easier when you're in the business of passing exams.

Make mine a double, Steve.

Re:journal

I'll have a treble!!!

In fact make it the bottle after this week!

I suspect, if it is an exam question, the suspense account will be open (perhaps?)

It's a long time since I've looked at an AAT exam paper let alone a question on journals! :shock:

Re:journal

Let's hope so.

Good luck Chris.

Steve