Reference no: EM132538615

The trial balance of S Juma, a sole trader, did not balance on 30 April 1995.

The difference was put in the suspense account. The final accounts which were then prepared showed a net profit of Sh. 64,000. During audit, the following errors were noted:

i. A loan from ABD Bank of Sh 10,000 was entered correctly in cash book but was not posted to the ledger.

ii. A cheque of Sh. 4,000 for tent was not entered in the books.

iii. Closing stock was overvalued by Sh 1,500.

iv. Discount allowed of Sh 500 was entered in the discount-received account.

v. The opening stock was understated by Sh 3,200.

vi. Prepaid insurance of Sh 220 had been included in the profit and loss account.

vii. Goods destroyed by fire amounting to Sh 12,000 were written off in the profit and loss account. However, the insurance company has agreed to compensate the full amount.

Required:

Question 1: Journal entries to correct the errors.

Question 2: Statement of corrected net profit.