Correcting an Incorrect account entry - The Book-keepers Forum (UK)

mmanley · Member

Correcting an Incorrect account entry

ProBowlUK · Senior Member

mmanley wrote:
How do you draft a journal entry to correct the following error.

The Monthly total of goods returned to suppliers in October, amounting to £200, has been debited to the purchases account.

I suspect there would be a Trial Balance error of £400 too much on the Debit side.

Need to put that back where it belongs, so ...
credit           Purchase Returns    £200
credit           Purchases               £200

In practice, you may not find the reasons for the imbalance straight away, so a Suspense Account would have been created with the £400 debit, and the corrections posted from there when found.

Hope I got that right (???)

I would have thought there'd be plenty of examples of these corrections in the course text books.

-- Edited by ProBowlUK on Friday 5th of March 2010 10:46:41 PM

-- Edited by ProBowlUK on Friday 5th of March 2010 10:48:25 PM

Sue T · Veteran Member

Credit the Purchase a/c with £400
Debit the Creditor control a/c with £400

Sue

-- Edited by Sue T on Friday 5th of March 2010 11:13:55 PM

-- Edited by Sue T on Friday 5th of March 2010 11:22:21 PM

Shamus · Forum Moderator & Expert

Hi Mark,

Sue is correct as always. But to expand on it for you to make clear whats happened here.

The purchase returns were recorded as a debit rather than a credit. The £400 credit to the purchase account removes the £200 misposting and also correctly applies the £200 as a credit.

The assumption is that the rest of the posting was also made incorrectly so as per the purchases account the other affected account will need to be reversed and applied properly.

In your work book that may be called a creditor control account or perhaps something completely different. The key is that you need to reverse and properly apply there as well.

As mentioned before. Sue's answer is perfect but I just felt that you could do with a little more explanation as I suspect that your quite new to this.

Welcome to the forum by the way Mark. Hope that you learn a lot from the regular contributors on here.

Kind regards,

Shaun.

Sue T · Veteran Member

Shamus wrote:

Hi Mark,

Sue is correct as always.

You obviously didn't see my faux pas on the VAT section then Shaun wink

You explain things so better than me Shaun, I just give the answer, hopefully correctly biggrin

Sue

-- Edited by Sue T on Friday 5th of March 2010 11:59:49 PM

-- Edited by Sue T on Saturday 6th of March 2010 12:07:40 AM

mmanley · Member

I am so glad that I found this forum. Thank you every one for your input, it has made it much clearer now.

Could you answer one more question though. Assuming that the error had only been made in posting to the wrong side of the purchase account and the other side of the transaction had been posted correctly, is it possible to make a journal entry of £400 credit only, as this would solve the problem as well.

Shamus, you are right, I am new to this. Deceided to retrain after being made redundant back in August and bookkeeping has always interested me. I am training with a company called Ideal Schools and their terminology does differ slightly to others, so sometimes it does get cofusing but I am getting their slowly.

Thank you all once again.

Kind regards

Mark

Shamus · Forum Moderator & Expert

Hi Mark,

There are various different types of error. The original one that both Sue and myself were talking about was where the books were still in balance but an error had been made (mispostings to both sides).

The error that your referring to is the sort that I prefer as the books don't balance (unless there's another complimentary error) so its immediately apparent that something is amiss.

In this instance one would apply a journal entry to correct only the side that was in error. So, only the £400 to reverse the misposting to the purchases account.

When using computer packages (dependant upon the package. I believe that Sage is better than Quickbooks in this area) there are some errors that it makes near impossible for you to make such as the sort of misbalancing of applying two debits or two credits that we're talking about here.

What business area are you coming from? I'm from banking so thankfully not too big a leap between the two worlds for myself.

Ideal schools are from all reports excellent. You've definitely made a good choice there.

cheers,

Shaun.

mmanley · Member

Hi Shaun,

I'm from a Retail management background, (31 Years) in fact, so a lot of the principles of bookkeeping ar alraedy familiar to me. I really am looking forward to progressing in this line of work.

I am glad that you think that Ideal Schools were a good choice, as I selected them based on the fact that they were awarded Training provider of the year by the ICB.

Anyway, thanks again Shaun, I am so very grateful for your help and look forward to conversing with you again.

Kind Regards

Mark

Stardoe · Guru

Hi Mark,

Welcome to the forum. I am also studying with Ideal Schools, doing Levels 1,2 and 3 manual bookkeeping and Levels 2 and 3 computerised. So far (I am on Level 2 manual), I have found them very good. They were the only one I could find that offered the complete package I wanted at a very reasonable price.

Which level are you on at the moment? Don't think Control accounts were introduced until Level 2.

Pauline

mmanley · Member

Hi Pauline,

I went the whole hog and opted for their career path option, which consists of the following:

Level I Certificate in Basic Bookkeeping
Level II Certificate in Manual Bookkeeping
Level III Diploma in Manual Bookkeeping
Level III Diploma in Payroll Management
Sage Computerised Bookkeeping (Levels II & III)
Level III Small Business Financial Control Diploma
Sage Certification Course

They gave me a really good deal on the entire package and the last two courses on the above list were thrown in for free.

How are you finding the course?

Mark

mmanley · Member

Sorry Pauline,

I forgot to say I'm on Level I, so have just started.

Mark

Stardoe · Guru

Wow, you have gone the whole hog....

I started on the course as I have had quite a few years experience in bookkeeping, but had no proper qualifications. I did some research and decided that the ICB was the way to go for what I needed. Finding the course relatively easy at the moment, although I have learnt some new stuff......however it's bound to get harder!

I assume you are going to do the ICB exams? Good luck with your studies, can't be easy changing tack after 30 odd years.

There are lots of helpful people on here and I'm sure you'll do well

Pauline

April · Newbie

Hi Everyone, im new to this forum too, and this is my first posting :)

Sorry im few days late but ive just found this thread!

Ive been studying the ICB Basic bookkeeping aswell, ive just registered with the ICB and about to apply for my final exam.

I did exactly the same as you mmanley, it toke me the whole day trying to figure out the answer! In the end i put dr purchase ledger 400 and cr purchase returns 400 as youve discussed already.

The answer they gave was dr suspense a/c 400 and cr purchase returns 400.
This was because you would have been pending details of the affected suppliers.

Hope this helps and that im not to late!

Kind Regards

April

mmanley · Member

Hi April,

Welcome to the forum and thanks for you input. I covered my bases a bit with this question in the end, putting the following answer:

Assuming that the error was only made to the purchase returns account and all the creditor accounts were posted correctly, then the journal entry would be:
Credit - Purchase Returns

However

If the creditor accounts effected had also been posted to the wrong side, then the journal entry would be: Debit - Creditors
Credit - Purchase Returns

I am still waiting on the results for that assignment, so will be interesting see how they mark that question.

I was so glad that I stumbled across this forum, and I'm sure you will be to, every one is so helpful and understanding.

Good luck with your exam.

Kind regards

Mark

Lisa68 · Veteran Member

Hi Mark and April

I have just passed level I manual and level II Sage which I took with the Home Learning College I am looking for another college to continue my studies as the HLC are very expensive. Can you tell me if you can take the exams at home with ICB or if you have to go to a centre to take them??

Good luck with your studies.

Lisa

PJC Bookkeeping · Veteran Member

Lisa,

You can take the computerised exams at home but I think you will need to visit a registered centre for the manual ones available 3 times a year (Feb, June & October) unless the ICB have changed the goalposts!

Good luck!

Peter

PJC Bookkeeping Services

Shamus · Forum Moderator & Expert

Pretty sure that the goal posts move from June Peter when the manual exams should be available to be taken whenever required at 1600 centres around the UK. (Anywhere that you can take a driving theory test you should be able to do the ICB manual exams).

Lisa, try Premier training. Very good reports from this site and a lot more reasonable on price than HLC.

Shaun.

Lisa68 · Veteran Member

Hi Shaun & Peter

Thankyou for your reply's, I will have a look at Premier Training... I do prefer to sit the exams at home as there isn't so much pressure, thats the one thing I liked about HLC, but I suppose i'd better start getting use to the pressure..

Kind Regards. Lisa

Lisa Jo · Senior Member

Doesnt cost of sales / stock come in on this level, rather than just "purchases"?

Inarush · Member

Hey everyone,
This is my first post-i was intrigued by the question, as im doing the same course and the same assignment at the moment.
I guess they changed the question, as it now says :
THE MONTHLY TOTAL OF GOODS RETURNED TO SUPPLIERS IN OCTOBER, AMOUNTING TO £200,
HAS BEEN DEBITED TO THE PURCHASES RETURNS ACCOUNT.

Isnt that just a case of:
Credit Purchases returns £400, so that the balance would be £200

Thx for your help everyone.

Rhianrach · Expert

Inarush wrote:

Hey everyone,
This is my first post-i was intrigued by the question, as im doing the same course and the same assignment at the moment.
I guess they changed the question, as it now says :
THE MONTHLY TOTAL OF GOODS RETURNED TO SUPPLIERS IN OCTOBER, AMOUNTING TO £200,
HAS BEEN DEBITED TO THE PURCHASES RETURNS ACCOUNT.

Isnt that just a case of:
Credit Purchases returns £400, so that the balance would be £200

Thx for your help everyone.

I agree but there's always the other side which I believe in this case would be a suspense account.

Inarush · Member

Thank you so much for your reply.
I guess a suspense account entry would be justified, if we dont yet know if any of the suppliers accounts have been affected.
Thank you again,
Regards,Ina