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

Purchase of office furniture for Rs 12,000 was wrongly debited to the Purchases account. The correct rectifying entry is:

Debit Furniture account and credit Purchases account by Rs 12,000. This is an error of principle, a capital item treated as revenue. Only the debit was placed in the wrong account, so moving the amount from Purchases to Furniture corrects it without touching the credit side.

  1. ADebit Furniture account Rs 12,000; Credit Purchases account Rs 12,000Correct
  2. BDebit Purchases account Rs 12,000; Credit Furniture account Rs 12,000
  3. CDebit Furniture account Rs 12,000; Credit Suspense account Rs 12,000
  4. DDebit Furniture account Rs 24,000; Credit Purchases account Rs 24,000

Explanation

The correct entry was Debit Furniture, Credit Cash or Creditor. The error debited Purchases instead of Furniture, so the cash side is right. To rectify, debit Furniture and credit Purchases with Rs 12,000. Reversing the direction would double the error.

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