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ksmith
adjustment for the correction of errors account

mead's private car valued at 7,800 was presented to the business. He took a used freezer from the business for an agreed value of 800. The only entry made in the books was a debit of 800 in the equipment account. The freezer had cost 2000 and had a book value of 1300 account


3 Comments
ksmith
ksmith
Can anyone explain how I do this adjustment? I literally haven't a clue
Ellenxox
Ellenxox
so you have to add 7800 to the vehicles a/c and 7800 to capital (Because he gave a private car to the business). Then you have drawings of 800 since that's what he took from the business. Since the freezer was worth 1300 but you took it for 800, thats a loss of 500 which you put into the p and l as a loss. You should have credited equipment 1300, not debited it 800 so to fix this credit 2100. If there is a section for depreciation, take 700 out of it because when you dispose of equipment you have to dispose of depreciation on it too. Then put the difference between the debit and credit side into suspense. Havent done this topic in a while so not 100% sure that that's right but hope this helps anyway.
ksmith
ksmith
thanks so much
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