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Difficulty: Very hardBalancing Ledger Accounts and Extracting Trial Balance

The bookkeeper of Danjuma Commercial Enterprise extracted a trial balance that failed to agree. Upon detailed auditing, the following extraction and posting errors were identified:

1. A Discount Received balance of ₦14,500₦14,500 was omitted entirely from the trial balance.
2. The Motor Vehicles account balance of ₦280,000₦280,000 was mistakenly listed on the credit column of the trial balance.
3. An amount of ₦65,000₦65,000 spent on purchasing Office Equipment was correctly recorded in the cash book but wrongly posted to the Purchases Account in the ledger.

If the unadjusted trial balance showed a total debit column of ₦1,420,000₦1,420,000, what is the correct Trial Balance total after all errors are properly rectified?

  1. A
    ₦1,635,000
  2. ₦1,700,000Answer
  3. C
    ₦1,765,000
  4. D
    ₦1,420,000

Answer

The correct Trial Balance total after rectifying all errors is ₦1,700,000.
Motor Vehicles is an asset account with a debit balance. Having been extracted to the credit side, the debit column of ₦1,420,000 omitted this ₦280,000 balance. Adding ₦280,000 to ₦1,420,000 gives ₦1,700,000. Discount Received is a credit item so it does not affect the debit column, while the misclassification of Office Equipment as Purchases is an Error of Principle between two debit accounts that leaves the total debit sum unaffected.

Step-by-Step Solution

1
Analyze the impact of Error 1 (Omission of Discount Received of ₦14,500).
Discount Received is a revenue item with a credit balance. Omitting it affects only the credit side of the trial balance, so no adjustment is needed for the debit total.
Credit omissions do not alter the debit side calculation.
2
Analyze the impact of Error 2 (Misplacement of Motor Vehicles balance of ₦280,000 on the credit side).
Motor Vehicles is a non-current asset with a debit balance. Since it was listed on the credit side, the debit column was understated by ₦280,000.
Restoring the asset balance to the debit column requires adding ₦280,000 to the initial debit total.
3
Analyze the impact of Error 3 (Office Equipment of ₦65,000 posted to Purchases Account).
This is an Error of Principle. Both Purchases and Office Equipment carry debit balances. The amount of ₦65,000 was already included in the debit total under Purchases.
Reclassifying between two debit accounts does not change the overall debit column sum.
4
Calculate the corrected Trial Balance total.
₦1,420,000+₦280,000=₦1,700,000₦1,420,000 + ₦280,000 = ₦1,700,000.
Summing the initial debit total and the required debit adjustment yields the correct total.

Key Concept

Impact of Ledger Extraction and Posting Errors on Trial Balance Totals
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Topics

Balancing Ledger Accounts and Extracting Trial Balance

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