Required a. Prepare the Suspense Account b. Draw up the Adjusted Profit for the year
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
When the
Upon scrutiny of the records, the following discrepancies emerged:
1. Motor Vehicle costing GH¢22,500 purchased by cash during the year had been credited to
2. Plant Repairs of GH¢12,555 had been entered to the credit side of Plant and Equipment Account, 20% depreciation is Charged on plant and equipment.
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3. GH¢ 18,000 Interest earned from loan issued had been credited to Cash Book Account and debited to Interest Payable.
4. Yaa Nkotodwe paid the Enterprise an amount of GH¢1,890 in full settlement of debt owed to him. This amount had been charged to debit side of Yaa Nkotodwe’s Account, but credited to Cash Book as GH¢1,080.
5. A folio in the cash payments book has been carried forward as GH¢57,375 instead of GH¢60,615
6. The Cash book balance was undercast by GH¢9,540
7. Returns of goods worth GH¢1,935 to a supplier had been posted to the credit side of his account even though it was correctly entered in the returns outwards book
8. The purchases day book has been overcast by GH¢21,780
9. The discount columns in the cash book had been interchanged when posting to the nominal ledger, these are discount allowed GH¢22,680 and discount received GH¢28,530
10. A purchase invoice for GH¢13,500 posted to the purchases ledger, had been credited in the sales day book
11. A sales invoice of GH¢76,500 correctly recorded in the sales ledger had been entered in the sales account as GH¢71,325
Required
a. Prepare the Suspense Account
b. Draw up the Adjusted Profit for the year
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