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Difficulty: MediumGeneral Journal (Journal Proper) and Opening Entries

A firm bought office furniture on credit for ₦250,000\text{₦}250,000 from Alaba Furniture Mart. The transaction was erroneously debited to the Purchases Account. Which of the following entries in the General Journal will correctly rectify this error?

  1. Debit Office Furniture Account ₦250,000\text{₦}250,000 and Credit Purchases Account ₦250,000\text{₦}250,000Answer
  2. B
    Debit Purchases Account ₦250,000\text{₦}250,000 and Credit Office Furniture Account ₦250,000\text{₦}250,000
  3. C
    Debit Office Furniture Account ₦250,000\text{₦}250,000 and Credit Alaba Furniture Mart Account ₦250,000\text{₦}250,000
  4. D
    Debit Alaba Furniture Mart Account ₦250,000\text{₦}250,000 and Credit Purchases Account ₦250,000\text{₦}250,000

Answer

Debit Office Furniture Account ₦250,000\text{₦}250,000 and Credit Purchases Account ₦250,000\text{₦}250,000
When a non-current asset purchase is erroneously debited to the Purchases Account, the error is rectified through the General Journal by debiting the specific asset account (Office Furniture) and crediting the Purchases Account to cancel the incorrect debit.

Step-by-Step Solution

1
Analyze the original incorrect entry made.
Purchases Account was debited with ₦250,000\text{₦}250,000, while Alaba Furniture Mart was correctly credited.
Purchase of a non-current asset was misclassified as revenue expenditure in the Purchases Account.
2
Determine the necessary correcting adjustments.
The Office Furniture Account requires a debit of ₦250,000\text{₦}250,000, and the Purchases Account requires a credit of ₦250,000\text{₦}250,000.
Debiting Office Furniture Account records the asset, while crediting Purchases Account removes the incorrect debit balance.
3
Formulate the rectifying journal entry.
Debit Office Furniture Account ₦250,000\text{₦}250,000; Credit Purchases Account ₦250,000\text{₦}250,000.
This restores the double entry balance without altering the supplier's account, which was correctly credited initially.

Key Concept

Correction of Errors via General Journal (Journal Proper)
Estimated Time:1m 15s
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Topics

General Journal (Journal Proper) and Opening Entries

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