Cash sales of Rs. 6,000 are entered in the Sales Book instead of the Cash Book. What is the effect before correction?
Correct answer: D. The trial balance agrees, but cash is understated
- A. The trial balance does not agree
- B. Cash and sales are both understated
- C. Debtors and sales are both overstated
- D. The trial balance agrees, but cash is understated
Explanation
The Sales Book posting credits Sales and debits the debtors account, while the Cash Account receives no debit. Both sides of the trial balance are therefore recorded, so the trial balance agrees even though cash is understated and debtors are overstated.
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About Correction of Errors and Suspense Accounts
Accounting errors are corrected by journal entries after identifying whether the mistake affects one account or both sides of double entry. Suspense accounts temporarily hold an unexplained trial balance difference and must be cleared, while errors of omission, commission, principle, original entry and reversal require different corrections.
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