Question

Depreciation on furniture \[Rs.\,2,970\;\] was wrongly recorded as \[Rs\;2,790.\] If this error is located after preparation of the final account then which of the following rectification entries is correct?
A. Suspense Account Dr. $180$
 To Profit & Loss Adj. ACCOUNT $180$

B. Profit & Loss Adj. Account Dr. $180$
To Furniture Account $180$

C. Furniture Account Dr. $180$
To Profit & Loss Adj. Account $180$

D. Profit & loss Adj. Account Dr. $180$
To Suspense Account $180$

Answer 1

Hint:Depression tells how much of an asset’s value has been utilised, that is it is the process of deducting the total cost of assets that is bought into the business.Suspense account or trial account used temporarily to carry out doubtful entries and discrepancies pending their analysis and permanent classification.

Complete step by step answer:
After preparing the trial balance it was found that there was an error in posting of depreciation.
(A) Suspense Account Dr. $180$
To Profit & Loss Adj. ACCOUNT $180$
\[\because \] Depreciation is affected so we can’t debit suspense Account.
Here the affected Account is furniture. It is a balanced sheet item, and we can’t credit profit and loss accounts.
\[\therefore \,\]option A is incorrect.

(B) Profit & Loss Adj. Account Dr. $180$
To Furniture Account $180$
Here depreciation is affected. It is a nominal account so we can debit. Furniture is effective; it is a balance sheet item we can credit to a furniture account. Given in the question that a lesser amount has been recorded for depreciation. Therefore, the difference should be credited to furniture account, i.e.,
\[ \Rightarrow Rs.2970 - Rs.2790\]
\[Rs.180\]
To complete the double entry Profit and loss adjustment account is debited.
\[\therefore \,\]option B is correct.

(C) Furniture Account Dr. $180$
To Profit & Loss Adj. Account $180$
Here if we debit furniture it shows that assets are increasing but assets are decreasing.Furniture has been affected. It is a balanced sheet item, so it is affected that we can’t credit profit and loss accounts.
\[\therefore \,\]option C is incorrect.

(D) Profit & loss Adj. Account Dr. $180$
To Suspense Account $180$
Here depreciation is affected. It is a nominal account so we can debit but furniture is affected by the credit item. It is a balance sheet item we can’t credit suspense accounts with.
\[\therefore \,\]option D is incorrect.

Note: Trial account is utilised for monetary transactions like cash disbursements, cash receipts and journal entries with the respective account. Adding the journal entry is sufficient to correct an accounting error and this type of journal entry is said to be correcting entry. Depreciation is affected, it is a nominal Account so we need to debit as per nominal account rule. In credit side furniture is a balance sheet item so we have to credit hence the correct entry is option’B’.