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WAEC Financial Accounting 2017 Question 8

Question 8

Correction of Errors and Suspense Account

Discount allowed on goods invoiced at GH¢100,000 was calculated at the rate of 20% instead of 10%. The error is corrected by debiting.

  1. A.customer account with GH¢20,000; crediting discount allowed with GH¢20,000.
  2. B.discount allowed with GH¢10,000; crediting customer's account with GH¢10,000.
  3. C.customer's account with GH¢10,000 crediting discount allowed with GH¢10,000.
  4. D.discount allowed with GH¢20,000; crediting cash with GH¢10,000.
Show the answer and explanation

Answer: C (customer's account with GH¢10,000 crediting discount allowed with GH¢10,000.)

Explanation

Discount was overstated by GH¢10,000 (20,000 - 10,000), so reverse the excess: debit the customer and credit discount allowed with GH¢10,000.