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Help needed on a question

  • 05-03-2009 4:35pm
    #1
    EPGFoley
    Closed Accounts Posts: 4 ✭


    Can anybody help me with this question:

    (Accounting year end = 30/09/03)
    "Interest ammounting to €45, charged on a client's overdue account, has been as €55 in the interest account. Following a complaint from the clientthe interest charge was reduced to€25 but this adjustment has not yet been recoognised in the books.
    Show the journal entries necessary to correctly record the transaction"

    I just cant get my head around what to do...any help would be greatly appreciated.

    Thanks


Comments

  • #2
    BABYDOLL
    Registered Users, Registered Users 2 Posts: 67 ✭✭BABYDOLL


    EPGFoley wrote: »
    Can anybody help me with this question:

    (Accounting year end = 30/09/03)
    "Interest ammounting to €45, charged on a client's overdue account, has been as €55 in the interest account. Following a complaint from the clientthe interest charge was reduced to€25 but this adjustment has not yet been recoognised in the books.
    Show the journal entries necessary to correctly record the transaction"

    I just cant get my head around what to do...any help would be greatly appreciated.

    Thanks

    Presumably the books are un balanced;(a) as they stand (b) correction

    Client Account
    Interest charged €45
    less agreed credit €20
    Closing balance €25

    Interest charged account
    Interest receivable €55
    Less Agreed Credit €20
    Less incorrect entry €10 (presumably)
    Closing balance €25

    HTH


  • #3
    Hanley
    Banned (with Prison Access) Posts: 21,981 ✭✭✭✭Hanley


    EPGFoley wrote: »
    Can anybody help me with this question:

    (Accounting year end = 30/09/03)
    "Interest ammounting to €45, charged on a client's overdue account, has been as €55 in the interest account. Following a complaint from the clientthe interest charge was reduced to€25 but this adjustment has not yet been recoognised in the books.
    Show the journal entries necessary to correctly record the transaction"

    I just cant get my head around what to do...any help would be greatly appreciated.

    Thanks

    edit: misread


  • #4
    Hanley
    Banned (with Prison Access) Posts: 21,981 ✭✭✭✭Hanley


    EPGFoley wrote: »
    Can anybody help me with this question:

    (Accounting year end = 30/09/03)
    "Interest ammounting to €45, charged on a client's overdue account, has been as €55 in the interest account. Following a complaint from the clientthe interest charge was reduced to€25 but this adjustment has not yet been recoognised in the books.
    Show the journal entries necessary to correctly record the transaction"

    I just cant get my head around what to do...any help would be greatly appreciated.

    Thanks

    I always found the best way to do this was to work backwards from the original entry.

    So it probably woulda been;

    Dr Debtor 45
    Cr P&L - interest receivable 55

    Leaves a debit of 10 to go somewhere.... but where? Suspense maybe.

    Assuming it goes to suspense, the entries to reduce it to 25 are;

    Dr P&L - interest receivable 30
    Cr Debtor 20
    Cr Suspense 10

    Anyone got any other suggestions?


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