Goods purchased on credit for Rs. 8,040 are recorded as Rs. 8,400 in both Purchases Account and the supplier's account. Which entry rectifies the error?
Correct answer: A. Debit Supplier Rs. 360 and credit Purchases Rs. 360
- A. Debit Supplier Rs. 360 and credit Purchases Rs. 360
- B. Debit Purchases Rs. 360 and credit Supplier Rs. 360
- C. Debit Suspense Rs. 360 and credit Supplier Rs. 360
- D. Debit Supplier Rs. 8,040 and credit Purchases Rs. 8,040
Explanation
Both accounts are overstated by Rs. 360, so the supplier is debited and Purchases is credited to reduce them. Since both sides were affected equally, the trial balance still agrees and suspense is not used.
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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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