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ACCA Applied Knowledge · Financial Accounting · Correction of errors

A company bought office furniture for $1,200 on credit. The purchase was debited to the purchases account and credited to the payables control account. What is the correcting journal?

Debit furniture cost $1,200 and credit purchases $1,200. The furniture was wrongly treated as inventory purchases, an error of principle. Moving the debit to the non-current asset account fixes it, and the payables credit is already correct.

  1. ADebit Furniture cost $1,200; credit Purchases $1,200Correct
  2. BDebit Purchases $1,200; credit Furniture cost $1,200
  3. CDebit Furniture cost $1,200; credit Payables $1,200
  4. DDebit Furniture cost $2,400; credit Purchases $2,400

Explanation

Furniture is a non-current asset, not purchases of inventory for resale. The debit sits in purchases wrongly, so credit purchases $1,200 and debit furniture cost $1,200. The payables credit is correct, so option C would duplicate it.

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