Reference no: EM132532947

Bernardus Swartbooi is a sole trader with a small business operating in the Northern Industrial of Windhoek. The trial balance extracted as at 31 December 2016 failed to agree. The debits exceeded the credits by N$4,120.

A detailed examination of the books was undertaken, and the following matters were uncovered:

1. The total in the sales daybook was N$42,100 - the figure used when posting sales to the T- accounts was N$41,200.

2. No entry had been made for expenses paid in cash from the petty cash tin, the expenses paid in this manner were as follows:

a. Canteen supplies N$75

b. Postage stamps N$35

c. Present for retiring employee N$170

3. Discounts allowed of N$65 were credited to the discount received account. The entry in the receivable's personal account was correct.

4. A credit notes for N$770 for purchases returns was treated correctly in the supplier's account and debited to the purchases returns account as N$880.

5. Acheque payment to a payable for N$1,300 was treated appropriately in the supplier's account and debited to drawings.

6. Cash drawings by Bernardus Swartbooi of N$1,110 were treated as cash sales in error. The transaction processed is instead for a cash sale of N$1,100.

7. An old motor vehicle was sold on December 15th for N$3,700. The vehicle originally cost N$16,750 and had a balance in the accumulated depreciation account of N$14,100 at the time of sale. The only entry that has been made to record the transaction is to debit bank and credit sales with N$3,700.

(Ignore the effects of VAT and depreciation)

REQUIRED:

Question a) Prepare the journal entries necessary to correct the above errors. Ignore narrations.

Question b) draw up a suspense account to clear the difference.

Question c) draw up a working on proprietor's profit showing the effect (if any) of correcting each of the above errors.