I can help you with this accounting problem.

It asks you to correct errors in a company's

financial records and prepare several corrected statements. I'll break down the steps to solve
this.
First, let's analyze the provided image, which contains the following information:
Problem Statement:
J. Mahon, a retail shop owner, prepared a trial balance on October 31, 2015, which failed to
agree. The difference was placed in a suspense account. The draft accounts showed a net profit
of $8,700 and a working capital of $10,950.
Subsequently, the following errors were discovered:
1.​ A purchase of furniture costing $3,700 had been debited in the purchases account. A
depreciation of 20% on cost of that furniture had not been provided.
2.​ Credit sales of $500 to a customer had been correctly entered in the customer's account
but omitted from the sales account.
3.​ Rent paid, amounting to $420, had been credited to the Rent receivable account.
4.​ Goods bought from a supplier, costing $7,250, had been recorded in the accounts as
$7,520.
5.​ Bank charges of $150 appeared in the cash book but had not been posted to the ledger
account.
6.​ A credit note from Amos, a supplier, for $200 had been correctly entered in the Returns
Outwards account but had been debited to Amos' account as $240.
7.​ A debit balance in the sales ledger of $350 had been omitted from the list of balances
included in the trial balance.
Tasks:
The problem asks for three things:
(a) (i) Journal entries for the correction of the above errors. (Narrations are not required.)
(a) (ii) A suspense account, clearly showing the original difference on the trial balance.
(b) A statement showing corrected net profit for the year ended 31 October 2015. (c) A
statement showing corrected working capital.
I will now provide the step-by-step solution.

Part (a) (i) Journal Entries

Here are the journal entries to correct each of the errors.
Error 1:
●​ Debit: Furniture (to recognize the asset) - $3,700
●​ Credit: Purchases (to remove the incorrect debit) - $3,700
●​ Correction for Depreciation:
●​ Debit: Depreciation on Furniture (an expense) - $740 ($3,700 x 20%)
●​ Credit: Accumulated Depreciation on Furniture (a contra-asset) - $740
Error 2:
●​ This error is a transposition of a debit and a credit. The debit side is correct (customer's
account), but the credit side is understated.
●​ Debit: Suspense Account - $500 (The sales account was omitted from the trial balance,
meaning the trial balance was out by $500.)
●​ Credit: Sales - $500
Error 3:
●​ Rent paid is an expense, so it should be debited. It was incorrectly credited to a Rent
Receivable account. This is a double error.
 ●​ Debit: Rent Account (correct expense account) - $420
●​ Debit: Suspense Account (to correct the credit error) - $840 ($420 x 2)
●​ Credit: Rent Receivable Account (to reverse the incorrect credit) - $420
Error 4:
●​ Goods purchased for $7,250 were recorded as $7,520. The purchase account is
overstated.
●​ Debit: Suspense Account - $270 ($7,520 - $7,250)
●​ Credit: Purchases - $270
Error 5:
●​ Bank charges of $150 appeared in the cash book (a book of original entry) but were not
posted to the ledger. This means the ledger account is understated.
●​ Debit: Bank Charges (an expense) - $150
●​ Credit: Suspense Account - $150
Error 6:
●​ A credit note for $200 was correctly entered in Returns Outwards (a credit entry).
However, it was debited to the supplier's (Amos') account for $240.
●​ Correction for Supplier's Account: Amos' account should have been credited $200, but
was debited $240. The total difference is $440 ($200 + $240).
●​ Debit: Suspense Account - $440
●​ Credit: Amos (supplier's) Account - $440
Error 7:
●​ A debit balance of $350 was omitted from the trial balance.
●​ Debit: Suspense Account - $350
●​ Credit: Sales Ledger Control Account - $350

Part (a) (ii) Suspense Account

The purpose of a suspense account is to hold the difference in the trial balance. Once the errors
are corrected, the suspense account should balance to zero.
Let's summarize the entries that affect the suspense account:
Date Details Debit ($) Credit ($)
Balance (Original ?
Difference)
Error 2 $500
Error 3 $840
Error 4 $270
Error 5 $150
Error 6 $440
Error 7 $350
Totals $1,780 $770
To balance the suspense account, the original difference must be a credit.
Suspense Account | Particulars | $ | Particulars | $ | | :--- | :--- | :--- | :--- | | Sales (Error 2) | 500
| Balance b/d (Original difference) | 1,010 | | Rent (Error 3) | 840 | Purchases (Error 4) | 270 | |
Amos (Error 6) | 440 | Bank Charges (Error 5) | 150 | | | | Sales Ledger (Error 7) | 350 | | Total |
1,780 | Total | 1,780 |
The original difference in the trial balance was a credit of $1,010.

Part (b) Statement Showing Corrected Net Profit

We start with the uncorrected net profit and adjust it for the errors that affect profit and loss (i.e.,
income and expenses).
Draft Net Profit: $8,700
Adjustments:
●​ Error 1: The original purchases were overstated by $3,700, so we add this back.
Depreciation of $740 was not recorded, which is an expense, so we subtract it.
○​ Add back overstated purchases: +$3,700
○​ Subtract unrecorded depreciation: -$740
●​ Error 2: Sales were understated by $500, so we add this to profit.
○​ Add unrecorded sales: +$500
●​ Error 3: Rent paid was not debited; this is an expense. The original entry was a credit to
rent receivable, which did not affect profit. So we subtract the rent expense.
○​ Subtract unrecorded rent expense: -$420
●​ Error 4: Purchases were overstated by $270. We add this back to profit.
○​ Add back overstated purchases: +$270
●​ Error 5: Bank charges of $150 were not recorded. We subtract this expense.
○​ Subtract unrecorded bank charges: -$150
●​ Error 6: This error involves returns outwards and a supplier account. Neither of these
corrections directly affects the profit and loss statement, as they relate to balance sheet
accounts.
●​ Error 7: This is an omission of a sales ledger balance, which is a balance sheet item. No
effect on profit.
Corrected Net Profit Calculation:
●​ Draft Net Profit: $8,700
●​ Error 1 (Purchases): +$3,700
●​ Error 1 (Depreciation): -$740
●​ Error 2 (Sales): +$500
●​ Error 3 (Rent): -$420
●​ Error 4 (Purchases): +$270
●​ Error 5 (Bank Charges): -$150
●​ Corrected Net Profit: $11,860
Statement of Corrected Net Profit:
Details $
Net Profit (as per draft accounts) 8,700
Add:
Purchases (Error 1) 3,700
Sales (Error 2) 500
Purchases (Error 4) 270
Sub-Total 13,170
Less:
Depreciation (Error 1) 740
Rent (Error 3) 420
Bank Charges (Error 5) 150
Details $
Corrected Net Profit 11,860
Part (c) Statement Showing Corrected Working Capital
Working capital is defined as Current Assets minus Current Liabilities.
Draft Working Capital: $10,950
Adjustments: We need to find all the errors that affect current assets or current liabilities.
●​ Error 1: This involves a non-current asset (furniture) and an expense (depreciation). No
change to working capital.
●​ Error 2: Sales were understated by $500. This means Accounts Receivable (a current
asset) was also understated. The correction will increase working capital.
○​ Add: +$500
●​ Error 3: Rent was credited to Rent Receivable, a current asset. The correction removes
this incorrect credit. The net effect on working capital is zero, as the cash was already
paid.
●​ Error 4: Purchases were overstated by $270. This means Accounts Payable (a current
liability) was also overstated. Correcting this will decrease current liabilities, thus
increasing working capital.
○​ Add: +$270
●​ Error 5: Bank charges were not posted. This means the bank balance (a current asset)
was overstated. Correcting this will decrease working capital.
○​ Subtract: -$150
●​ Error 6: A credit note from a supplier for $200 was debited to the supplier's account as
$240. This means Accounts Payable (a current liability) was overstated.
○​ Correction: The supplier's account was debited $240 when it should have been
credited $200. This is a net overstatement of liabilities by $440 ($240 + $200).
○​ Add: +$440
●​ Error 7: A debit balance of $350 in the sales ledger (accounts receivable) was omitted.
This means a current asset was understated.
○​ Add: +$350
Corrected Working Capital Calculation:
●​ Draft Working Capital: $10,950
●​ Error 2 (Accounts Receivable): +$500
●​ Error 4 (Accounts Payable): +$270
●​ Error 5 (Bank): -$150
●​ Error 6 (Accounts Payable): +$440
●​ Error 7 (Accounts Receivable): +$350
●​ Corrected Working Capital: $12,360
Statement of Corrected Working Capital:
Details $
Working Capital (as per draft accounts) 10,950
Add:
Sales omitted (Increase in Receivables) 500
Purchases overstated (Decrease in Payables) 270
Returns note overstated (Decrease in 440
Payables)
Omitted debit balance (Increase in 350
Details $
Receivables)
Sub-Total 12,510
Less:
Bank charges not posted (Decrease in Bank) 150
Corrected Working Capital 12,360