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CSEET · Fundamentals of Accounting · Accounting Process

On 31 March, the books of Gupta Stores showed that a credit purchase of Rs 8,000 from Naveen was entered in the Purchases Book as Rs 6,800. What is the correct rectifying entry?

Debit Purchases Account and credit Naveen's account by Rs 1,200. The purchase was under-recorded by 8,000 minus 6,800, and since the error was in the book of original entry affecting both accounts equally, the shortfall is added to both without using Suspense.

  1. APurchases A/c Dr 1,200 to Naveen A/c 1,200Correct
  2. BNaveen A/c Dr 1,200 to Purchases A/c 1,200
  3. CPurchases A/c Dr 8,000 to Naveen A/c 8,000
  4. DSuspense A/c Dr 1,200 to Naveen A/c 1,200

Explanation

The purchase was recorded at Rs 6,800 instead of Rs 8,000, so Purchases was debited and Naveen credited by Rs 1,200 too little. Since both accounts were affected equally, no suspense arises. Add the shortfall: Purchases Dr 1,200, Naveen Cr 1,200. Option 2 reverses this and would reduce the liability.

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