Trial Balance and Rectification of Errors Test 17

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Trial Balance and Rectification of Errors Test 17

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Question 1
1 / -0

Which of the following errors will affect the trial balance?

A
Repairs to building wrongly debited to Building A/c.

B
Total of Purchase Journal by Rs1,000 short.

C
Freight paid on new machinery debited to Freight A/c.

D
None of the above.

Solution

A. Repairs to building wrongly debited to Building a/c- its a double sided error and hence trial balance will have no disagreement.
B.Total of purchase journal short by Rs. 1000- its a single sided error, hence affect the trial balance.
C. Freight paid on new machinery debited to freight a/c- its a double sided error, hence will not affect trial balance.
Question 2
1 / -0

Which of the following errors will not affect the agreement of trial balance?

A
Recording wrong amount in subsidiary book and in account of customer or creditor.

B
Errors of duplication.

C
Errors of complete omission.

D
All of the above.

Solution

A: Recording wrong amount in the subsidiary book and in customer a/c- Its a double-sided error affecting both the sided i.e. debit and credit. Hence no effect on the agreement of trial balance.

B: Errors of duplication- One transaction is recorded twice. It's a double-sided error. Hence no effect on the agreement of trial balance.

C: Errors of complete omission- One transaction is completely omitted in the recording. It's a double-sided error. Hence no effect on the agreement of trial balance.
Question 3
1 / -0

Which of the following errors will not be revealed by the trial balance?

A
Errors of principle.

B
Wrong balancing of an account.

C
Wrong totaling of an account.

D
All of the above.

Solution

Error of principle: This error will not be revealed by the trial balance as its a double-sided error.

Wrong balancing of an account: This error will not be revealed by the trial balance as only balances are carried to the trial balance.

Wrong totaling of an account: This kind of error cannot be revealed from the trial balance. These can only find out by scrutinizing the balances of each account if the trial balance is having difference.
Question 4
1 / -0

Which of the following is true?

A
Error of casting affects personal accounts.

B
Omission of a transaction from a subsidiary record affects only one account.

C
Error of carry forward affects two accounts.

D
Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue.

Solution

When an fundamental accounting principles are not followed while recording a transaction, it is an error of principle. For example, treating capital expenditure as revenue expenditure or vice -versa.
Question 5
1 / -0

Which of the following statements is / are true?
(i) An error in casting the subsidiary books is an error of commission.
(ii) An error in wrong casting of the sales day book will not affect the personal accounts of debtors.
(iii) Mistake in transferring the balance of an account to the trial balance will not affect the agreement of the trial balance.
(iv) The mistake of treating a liability as an income or vice versa will not affect the agreement of a trial balance.
The correct answer is ______________.

A
Only (i) of the above

B
Only (ii) of the above

C
Both (i) and (ii) of the above

D
(i), (ii) and (iv) of the above

Solution

i) True. An error of casting means the error of adding up the totals of the subsidiary books, this is an error of commission. Error of commission are the errors of wrong amount, wrong account etc.
ii) True. An error is wrong casting of sales day book will not affect the personal accounts of debtors. This will affect the trial balance.
iii) False. Mistake is transferring the balance of an account to the trial balance will affect the agreement of the trial balance as the debit and credit of the transactions will differ.
iv) True. The mistake of treating a liability as an income is a compensating error as both of them will affect the trial balance hence, will not affect the agreement of trial balance.
Question 6
1 / -0

Goods bought from Mukesh amounting to Rs $$5,500$$ were posted to the credit of his account as Rs$$5,000$$. If this error located after preparation of trial balance then which of the following rectification entry is correct?

A
Suspense A/c Dr $$500$$
To Mukesh A/c $$500$$

B
Mukesh A/c Dr $$500$$
To Suspense A/c $$500$$

C
Profit & Loss Adj.A/c Dr $$500$$
To Mukesh A/c $$500$$

D
Mukesh A/c Dr $$500$$
To Profit & Loss Adj.A/c $$500$$

Solution

Correct entry :-
Purchase Account    ......... Dr    5.500
To Mukesh A/c 5,500

Wrong entry:-
The error is done while posting, this is an error of casting where mukesh account is credited less by RS-500.
Rectification entry:-
Suspense A/c ..............Dr    500
To Mukesh A/c    500
Note:-
Suspense account is created temporarily when there is no subsequent account to debit/credit, usually in errors of posting.
Question 7
1 / -0

Under statement of closing stock or work-in-progress in the period will _________.

A
understate cost of goods manufactured in that period

B
overstate current assets

C
overstate gross profit from sales in that period

D
understate net income in that period

Solution

Closing stock is shown in the credit side of the trading account. Hence if the closing stock is under stated, it will affect the gross margin of the business.
Hence if the closing stock is under stated, this will results lower net income in that period.
Question 8
1 / -0

Rs$$2,400$$, being the pre-paid portions of insurance, was brought forward from the previous year as a credit balance in the nominal account. Identify the amount of the trial balance difference which will be placed in a suspense account.

A
Dr. $$4,800$$

B
Cr. $$4,800$$

C
Cr. $$2,400$$

D
Dr. $$2,400$$

Solution

Amount of the trial balance difference which will be posted to trial balance will be RS-4,800. One for not debiting RS-2,400 as pre-paid insurance is an asset and 2nd for the wrong credit of RS-2,400.
Question 9
1 / -0

Cartage Rs$$780$$ paid on machinery newly acquired was debited to carriage inward account. If this error located after preparation of trial balance then which of the following rectification entry is correct?

A
Machinery A/c Dr. $$780$$
Carriage Inwards Dr. $$780$$
To Profit & Loss Adj. A/c $$1,560$$

B
Machinery A/c Dr. $$780$$
To Carriage Inwards A/c Dr. $$780$$

C
Suspense A/c Dr. $$1,560$$
To Machinery A/c Dr. $$780$$
To Carriage Inwards A/c $$780$$

D
Carriage Inwards A/c Dr $$900$$
To Machinery A/c Dr. $$900$$

Solution

Correct entry :-
Machinery A/c    ......... Dr 780
To Cash A/c    780

Wrong entry:-
Carriage inwards A/c .......Dr    780
To Cash A/c 780

Rectification entry:-
Machinery A/c ..............Dr 780
To Carriage inwards A/c    780
As carriage inwards account was wrongly debited instead of machinery account, carriage inwards will be credited and machinery account will be debited to rectify the mistake.
Question 10
1 / -0

Total of purchases book was Rs$$10,000$$ short. If rectification is done before preparation of trial balance then which of the following is correct?

A
Purchases A/c Dr. $$2,000$$
To Suspense A/c $$2,000$$

B
Debit purchases account with Rs$$10,000$$ saying "To Short total of Purchases Book Rs$$10,000$$."

C
Credit purchases account with Rs$$10,000$$ saying "By Short total of Purchases Book Rs$$10,000$$."

D
Suspense A/c Dr. $$2,000$$
To Purchases A/c $$2,000$$

Solution

Since purchase books was totaled short by Rs. 10000, an amount of Rs.10000 has to be added to the purchases account. Rectification will be done by debiting the purchase account with Rs.10000 mentioning that "To short total of purchase book for Rs.10000"

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Trial Balance and Rectification of Errors Test 17

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Trial Balance and Rectification of Errors Test 17

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Question 1

Repairs to building wrongly debited to Building A/c.

Total of Purchase Journal by Rs1,0001,000 short.

Freight paid on new machinery debited to Freight A/c.

None of the above.

Solution

Question 2

Recording wrong amount in subsidiary book and in account of customer or creditor.

Errors of duplication.

Errors of complete omission.

All of the above.

Solution

Question 3

Errors of principle.

Wrong balancing of an account.

Wrong totaling of an account.

All of the above.

Solution

Question 4

Error of casting affects personal accounts.

Omission of a transaction from a subsidiary record affects only one account.

Error of carry forward affects two accounts.

Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue.

Solution

Question 5

Only (i) of the above

Only (ii) of the above

Both (i) and (ii) of the above

(i), (ii) and (iv) of the above

Solution

Question 6

Suspense A/c Dr $$500$$ To Mukesh A/c $$500$$

Mukesh A/c Dr $$500$$ To Suspense A/c $$500$$

Profit & Loss Adj.A/c Dr $$500$$ To Mukesh A/c $$500$$

Mukesh A/c Dr $$500$$ To Profit & Loss Adj.A/c $$500$$

Solution

Question 7

understate cost of goods manufactured in that period

overstate current assets

overstate gross profit from sales in that period

understate net income in that period

Solution

Question 8

Dr. $$4,800$$

Cr. $$4,800$$

Cr. $$2,400$$

Dr. $$2,400$$

Solution

Question 9

Machinery A/c Dr. $$780$$Carriage Inwards Dr. $$780$$ To Profit & Loss Adj. A/c $$1,560$$

Machinery A/c Dr. $$780$$To Carriage Inwards A/c Dr. $$780$$

Suspense A/c Dr. $$1,560$$To Machinery A/c Dr. $$780$$ To Carriage Inwards A/c $$780$$

Carriage Inwards A/c Dr $$900$$To Machinery A/c Dr. $$900$$

Solution

Question 10

Purchases A/c Dr. $$2,000$$To Suspense A/c $$2,000$$

Debit purchases account with Rs$$10,000$$ saying "To Short total of Purchases Book Rs$$10,000$$."

Credit purchases account with Rs$$10,000$$ saying "By Short total of Purchases Book Rs$$10,000$$."

Suspense A/c Dr. $$2,000$$To Purchases A/c $$2,000$$

Solution

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Total of Purchase Journal by Rs1,000 short.

Suspense A/c Dr $$500$$
To Mukesh A/c $$500$$

Mukesh A/c Dr $$500$$
To Suspense A/c $$500$$

Profit & Loss Adj.A/c Dr $$500$$
To Mukesh A/c $$500$$

Mukesh A/c Dr $$500$$
To Profit & Loss Adj.A/c $$500$$

Machinery A/c Dr. $$780$$
Carriage Inwards Dr. $$780$$
To Profit & Loss Adj. A/c $$1,560$$

Machinery A/c Dr. $$780$$
To Carriage Inwards A/c Dr. $$780$$

Suspense A/c Dr. $$1,560$$
To Machinery A/c Dr. $$780$$
To Carriage Inwards A/c $$780$$

Carriage Inwards A/c Dr $$900$$
To Machinery A/c Dr. $$900$$

Purchases A/c Dr. $$2,000$$
To Suspense A/c $$2,000$$

Suspense A/c Dr. $$2,000$$
To Purchases A/c $$2,000$$