Trial Balance and Rectification of Errors Test 14

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Trial Balance and Rectification of Errors Test 14

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Question 1
1 / -0

Preparation of Trial Balance helps, mainly in ________.

A
summarising business transactions

B
verifying the 'generally accepted accounting principles' have been observed

C
finalising the 'sources and uses of funds' statement

D
locating errors, if any, in books of accounts

Solution

Trial balance is prepared at the end of the financial year to check the accuracy of the books of account. If trial balance agrees, this can be assume that the books of account are arithmetical correct. But there are other types of errors which are there even the trial balance is tally.

Preparation of trial balance helps in locating the following error:
Compensating error
Error ofomission
Error of principle
Question 2
1 / -0

Purchase of office furniture worth $$Rs. 2500$$ has been debited to general expense account. It is ___________.

A
an error of omission

B
a clerical error

C
an error of principle

D
a compensating error

Solution

Purchase of office furniture has to be debited to furniture account as its an asset. This has been debited as general expenses. Its an error of principle as capital expenditure is debited as revenue expenditure.

Rectification entry will be as under:

Furniture A/c Dr. 2500
To General Expenses 2500
Question 3
1 / -0

$$Rs. 5,000$$ spent on repairing of Second-hand Machinery purchased is transferred to Repairs A/c. It is an error of __________.

A
omission

B
commission

C
principle

D
none of these

Solution

Amount of $$Rs.5000$$ spent on repairing of second hand machinery purchased. This amount is spent to improve the efficiency of the asset purchased and hence needs to be debited to the respective asset account.
Therefore, in the given case it is an error of principle as capital expenditure is debited as revenue expenditure.

Rectification will be passed as under:
Machinery A/c Dr. $$5,000$$
To Repairs A/c $$5,000$$
Question 4
1 / -0

Error of omission arises when_________________.

A
any transaction is left to be recorded.

B
any transaction is recorded in a fundamentally incorrect manner.

C
any transaction is incorrectly recorded, either wholly or partially.

D
none of the above

Solution

Omission means to leave out or exclude. Hence, error of omission arises when any transaction is left to be recorded.
Question 5
1 / -0

The most difficult type of misstatement to detect fraud is based on.

A
Related party purchases

B
Related party sales

C
The restatement of sales

D
Omission of a sales transaction from being recorded

Solution

Option D is correct.

The most difficult type of misstatement to detect fraud is based on omission of a sales transaction from being recorded.
Omission is completely/partially not recording a transaction. When a transaction has a error and the trial balance might not tally which might help in identifying if there is any error.
But in case of omission the trial balance will tally regardless, hence, its difficult to find out such errors.
Question 6
1 / -0

'Goods sent on approval basis' have been recorded as 'Credit sales'. This is an example of ______________.

A
error of principle

B
error of commission

C
error of omission

D
error of duplication

Solution

Goods sent on approval is not an actual sales hence not to be recorded as sales. This has to be recorded as sale on approval basis, once the confirmation is received for actual sales, than only it has to be considered as credit sale.
Its an error of principle.
Question 7
1 / -0

Unintentional omission or commission of amounts and accounts in the process of recording transactions are known as __________.

A
misinterpretation

B
frauds

C
errors

D
none of the above

Solution

Errors are those which are happened while recording the transaction in the books of account unintentionally. As recording of transactions are done by the junior accountant, there are chances of having the errors. Errors in accounting are classified as:
1) Error of principle
2) Error of Omission
3) Error of Commission
4) Compensating error
Question 8
1 / -0

_________ are neutralizing in nature, hence one error is compensated by other error or errors of opposite nature.

A
Errors of principle

B
Complete omissions

C
Compensating errors

D
Errors of commission

Solution

When one error of accounting is compensated by the other error, these are called compensating error. Compensating error nullify the affect and trial balance will not have any disagreement.

For example, an amount of Rs.1000 received from Ram is credited to his account as Rs.100 on the other hand, an amount of Rs.1000 paid to Sunil is debited to his account as Rs.100. A short credit of Rs.900 in Ram's a/c is neutralized by a short debit to Sunil's a/c.
Question 9
1 / -0

_________ arise as a result of some act of omission on the part of the person responsible for the maintenance of books of account.

A
Errors of commission

B
Errors of omission

C
Compensating errors

D
Errors of principle

Solution

When a particular accounting transaction is omitted to be recorded in the books of account, this is an error of omission. This kind of error are clerical error and happened due to negligence of the person responsible for accounting. Error of omission may be due to partial omission and complete error.
Question 10
1 / -0

Errors other than __________ are called clerical errors.

A
Errors of Principle

B
Partial Omission

C
Complete Omission

D
None of these

Solution

Errors can be classified as:
1) Error of principle
2) Error of omission
3) Error of Commission
4) Compensating error

Error of principle is that when the basic rule of accounting is violated. In such case, there will be no difference in trial balance. This is an error of concept and not a clerical error.
All other errors are classified as clerical error.

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Re-Attempt Weekly Quiz Competition

Trial Balance and Rectification of Errors Test 14

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Trial Balance and Rectification of Errors Test 14

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SHARING IS CARING

Question 1

summarising business transactions

verifying the 'generally accepted accounting principles' have been observed

finalising the 'sources and uses of funds' statement

locating errors, if any, in books of accounts

Solution

Question 2

an error of omission

a clerical error

an error of principle

a compensating error

Solution

Question 3

omission

commission

principle

none of these

Solution

Question 4

any transaction is left to be recorded.

any transaction is recorded in a fundamentally incorrect manner.

any transaction is incorrectly recorded, either wholly or partially.

none of the above

Solution

Question 5

Related party purchases

Related party sales

The restatement of sales

Omission of a sales transaction from being recorded

Solution

Question 6

error of principle

error of commission

error of omission

error of duplication

Solution

Question 7

misinterpretation

frauds

errors

none of the above

Solution

Question 8

Errors of principle

Complete omissions

Compensating errors

Errors of commission

Solution

Question 9

Errors of commission

Errors of omission

Compensating errors

Errors of principle

Solution

Question 10

Errors of Principle

Partial Omission

Complete Omission

None of these

Solution

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