Reference no: EM132608653

The bookkeeping system of Haile is not computerised, and at 30 September 2018, the bookkeeper was unable to balance the trial balance. The trial balance totals were: Debit N$1,796,100 Credit N$1,852,817

Nevertheless, she proceeded to prepare draft financial statements, inserting the difference as a balancing figure in the statement of financial position. The draft statement of comprehensive income showed a profit of N$141,280 for the year ended 30 September 2018.

She then opened a suspense account for the difference and began to check through the accounting records to find the difference. He found the following errors and omissions:

1. N$8,980 - the total of the sales returns book for September 2018 had been credited to the purchases returns account.

2. N$9,600 paid for an item of plant purchased on 1 April 2018 had been debited to plant repairs account. The company depreciates its plant at 20% per annum on a straight-line basis, with proportional depreciation in the year of purchase.

3. The cash discount totals for the month of September 2018 had not been posted to the general ledger accounts. The figures were: Discount allowed N$836 Discount received N$919. For discounts allowed, it was not anticipated that these customers would take advantage of these cash discounts when the invoices were first issued.

4. N$580 insurance prepaid at 30 September 2017 had not been brought down as an opening balance.

5. The balance of N$38,260 on the telephone expense account had been omitted from the trial balance.

6. A car held as a non-current asset had been sold during the year for N$4,800. The proceeds of sale were entered in the cashbook but had been credited to the sales account in the general ledger. The original cost of the car N$12,000, and the accumulated depreciation to date N$8,000, were included in the motor vehicles account and the accumulated depreciation account. The company depreciates motor vehicles at 25% per annum on a straight-line basis with proportionate depreciation in the year of purchase but none in the year of sale.

You are required to:

Question a) Open a suspense account for the difference between the trial balance totals. Prepare the journal entries necessary to correct the errors and eliminate the balance on the suspense account. Narratives are not required