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CMA Foundation · Fundamentals of Financial and Cost Accounting · Adjustment Entries and Rectification of Errors

Goods returned by a customer, Kiran, worth Rs 1,800 were entered in the sales returns book but no entry was made in Kiran's account. Before rectification, which statement is correct?

The trial balance debit total is higher than the credit total by Rs 1,800. The sales returns account was debited, but the matching credit to the customer's account was never posted, so the error is one-sided and disturbs the trial balance.

  1. AThe trial balance debit total is higher than the credit total by Rs 1,800Correct
  2. BThe trial balance credit total is higher than the debit total by Rs 1,800
  3. CThe trial balance still agrees
  4. DSales returns is understated by Rs 1,800

Explanation

The sales returns account was debited Rs 1,800 but Kiran's account was not credited. Debits therefore exceed credits by Rs 1,800. Rectification is to credit Kiran and debit suspense Rs 1,800 if the difference is in suspense.

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