Trial Balance and Rectification of Errors Test 28

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Trial Balance and Rectification of Errors Test 28

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following errors is an error of omission ?

A
Sale of $$Rs.500$$ was written in the Purchase Journal

B
Wages paid to Mohan have been debited to his account

C
The total of the sales journal has not been posted to the sales Account

D
None of these.

Solution

Error of omission is when a transaction is omitted to be recorded in the subsidiary books, there is neither debit or credit effect of such errors. Omission in posting total of sales journal into sales account refers to omission of transactions related sales and debtors.
Question 2
1 / -0

Rs. 2,400, being the prepaid portion 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. 2400

Solution

Prepaid expense is an asset and has a debit balance. When it is recorded as credit balance firstly the credit entry has to be cancelled to rectify the error and another entry has to be passed with the same amount to record original carry forward entry. So two times of the amount will be present in the suspense account. It means suspense A/c will be debited by 4,800
Question 3
1 / -0

Wages paid for installation of machinery Rs. 2,750 had been debited to wages account as Rs. 5,250. If this error located after preparation of final account then which of the following rectification entry is correct?

A
Machinery A/c Dr. 2,500

Suspense A/c Dr. 2,750

To Profit & Loss Adj. A/c 5,250

B
Profit & Loss Adj. A/c Dr. 5,250

To Machinery A/c 2.500

To Suspense A/c 2,750

C
Profit & Loss Adj. A/c Dr. 5,250

To Machinery A/c 2,750

To Suspense A/c 2,500

D
Machinery A/c Dr. 2,750

Suspense A/c Dr. 2,500

To Profit & Loss Adj. A/c 5,250

Solution

Machinery A/c Dr. $2, 750$
Suspense A/c Dr. $2, 500$
To Profit & Loss Adj. A/c $5, 250$
The mentioned transaction has two errors. Since the error is located after the preparation of the final account, rectification needs to be passed through the profit & loss adjustment account.

1) Recording of capital expenditure as revenue expenditure. It's an error of principle.
2) Amount of Rs. 2750 is recorded as Rs.5250. It's an error of commission.

To rectify the error, the following rectification entry needs to be passed:

Machinery A/c Dr. 2750 (with the actual amount)
Suspense A/c Dr. 2500 (due to wrong amount posting)
To P&L Adjustment A/c 5750 (to affect the P&L with the total amount)
Question 4
1 / -0

While carrying forward the total of one page of the Purchases Book to the next, the amount of Rs. 12,350 was written as Rs. 13,250. If this error located after preparation of trial balance then which of the following rectification entry is correct?

A
Purchases A/c Dr. 900

To Profit & Loss Adj. A/c 900

B
Purchases A/c Dr. 900

To Suspense A/c 900

C
Profit & Loss Adj. A/c Dr. 900

To Purchases A/c 900

D
Suspense A/c Dr. 900

To Purchases A/c 900

Solution

After the preparation of trial balance change cannot be made to the original account and repost them into trial balance. So a suspense account is maintained to rectify the errors of omission. Purchase has a debit balance and if the greater amount is debited, the difference amount is credited to cancel the original entry.
Question 5
1 / -0

The preparation of a Trial Balance helps in :

A
Locating errors of complete omission

B
Locating errors of principle

C
Locating errors of commission

D
None of these

Solution

The main objective of the trial balance is to ascertain the accuracy of accounts and locating errors. There are errors because of which the trial balance doesn't tally. While there are other errors where the trial balance tallies but the result will be incorrect.
Error of complete omission, an error of principle, and error of commission are those errors that do not affect the agreement of trial balance.
Question 6
1 / -0

Sales to Meena Rs.143 was credited as 413. This ____________ .

A
is an error of omission

B
will not affect the trial balance

C
Will not affect the profit

D
None of these

Solution

Wrong amount posted is an error of posting. This will affect the trial balance because wrong amount has been credited to the ledger account, while the debit aspect is correct. The credit balance of the trial balance will exceed the debit balance leading to unbalanced trial balance.
This will affect the profit because balance of sales account is shown in the trading account for calculating the gross profit, any change and the balance of sales account will affect the profit. This gross profiit is transferred to the profit and loss account to determine the net profit of the business, which will change because of change in gross profit because of change in balance of sales account.
Question 7
1 / -0

Sales of office furniture has been credited to Sales Account. It is :

A
A Clerical error

B
An error of principle

C
An error of omission

D
Compensating error

Solution

Sale of office furniture is a capital profit or capital income, it cannot be entered as normal sale. Error of principle is when basic accounting principle is not followed. There is no distinction between capital and revenue items. Here capital income is treated as revenue income. This error has no effect on the agreement of the trial balance as the right amount is debited or credited though to the wrong account but the net effect is the same.
Question 8
1 / -0

Rs.10,000 paid in cash for repair of a newly purchased old machine were debited to repairs account. This error:

A
is an error of omission

B
will affect the trial balance

C
will not affect the profit

D
None of these

Solution

When cash is paid for repairs of newly purchased old machine it is a capital expenditure and is debited to machinery account as it enhances the efficiency of the machinery as it has to be used for a longer period of time.
When this amount of repair is debited to repairs account, this is known as error of principle as capital expenditure is treated as revenue expenditure.
This error will not affect the trial balance because expense has been rightly debited though to the wrong account but the net effect remains the same, so the trial balance will tally.
This error surely affects the profit because it is a capital expenditure which is added to the value of the machinery, while here it has been written as revenue exoenditure which is deducted from the profit of the year. This in turn reduces the profit for the year.
Question 9
1 / -0

Rs.10,000 paid in cash for installation of a new machine were debited to Installation Expenses Account. This error:

A
is an error of omission

B
will affect the trial balance

C
Will not affect the profit

D
None of these

Solution

Installation expense on the purchase of new machinery is added to the value of the machinery. Any expense incurred on machinery at the time of purchase to get it in place and ready for use is capital expenditure and added to the value of the machinery.
When installation expense is debited to installation expense account, this is known as error of principle. Here no distinction is made between capital and revenue items. Here capital expenditure is debited as revenue expenditure. This error does not affects the agreement of the trial balance as the correct amount is debited only the account is wrong, the net effect is same.
This error affects the profit of the year, as revenue expenditure is deducted from the profit and loss account, while capital expenditure is transferred to the balance sheet.
Question 10
1 / -0

On opening Suspense Account the words recorded in the particular column are :

A
By Balance b/d

B
To Balance b/f

C
By Balance b/f

D
Difference in Trial Balance

Solution

After finding errors in the trial balance, the original books of accounts cannot be changed. To rectify the errors, a suspense account is opened with the difference in the trial balance so that the trial balance agrees (pending the correction of the errors causing this difference). This is the only time when entry is made without an effect on any other account. After the trial balance tallies with the suspense account, the errors are rectified.

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Trial Balance and Rectification of Errors Test 28

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Trial Balance and Rectification of Errors Test 28

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Question 1

Sale of $$Rs.500$$ was written in the Purchase Journal

Wages paid to Mohan have been debited to his account

The total of the sales journal has not been posted to the sales Account

None of these.

Solution

Question 2

Dr. 4,800

Cr. 4,800

Cr. 2,400

Dr. 2400

Solution

Question 3

Machinery A/c Dr. 2,500 Suspense A/c Dr. 2,750 To Profit & Loss Adj. A/c 5,250

Profit & Loss Adj. A/c Dr. 5,250 To Machinery A/c 2.500 To Suspense A/c 2,750

Profit & Loss Adj. A/c Dr. 5,250 To Machinery A/c 2,750 To Suspense A/c 2,500

Machinery A/c Dr. 2,750 Suspense A/c Dr. 2,500 To Profit & Loss Adj. A/c 5,250

Solution

Machinery A/c Dr. 2,750Suspense A/c Dr. 2,500To Profit & Loss Adj. A/c 5,250

Question 4

Purchases A/c Dr. 900 To Profit & Loss Adj. A/c 900

Purchases A/c Dr. 900 To Suspense A/c 900

Profit & Loss Adj. A/c Dr. 900 To Purchases A/c 900

Suspense A/c Dr. 900 To Purchases A/c 900

Solution

Question 5

Locating errors of complete omission

Locating errors of principle

Locating errors of commission

None of these

Solution

Question 6

is an error of omission

will not affect the trial balance

Will not affect the profit

None of these

Solution

Question 7

A Clerical error

An error of principle

An error of omission

Compensating error

Solution

Question 8

is an error of omission

will affect the trial balance

will not affect the profit

None of these

Solution

Question 9

is an error of omission

will affect the trial balance

Will not affect the profit

None of these

Solution

Question 10

By Balance b/d

To Balance b/f

By Balance b/f

Difference in Trial Balance

Solution

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Machinery A/c Dr. 2,500

Suspense A/c Dr. 2,750

To Profit & Loss Adj. A/c 5,250

Profit & Loss Adj. A/c Dr. 5,250

To Machinery A/c 2.500

To Suspense A/c 2,750

Profit & Loss Adj. A/c Dr. 5,250

To Machinery A/c 2,750

To Suspense A/c 2,500

Machinery A/c Dr. 2,750

Suspense A/c Dr. 2,500

To Profit & Loss Adj. A/c 5,250

Machinery A/c Dr. $2, 750$
Suspense A/c Dr. $2, 500$
To Profit & Loss Adj. A/c $5, 250$

Purchases A/c Dr. 900

To Profit & Loss Adj. A/c 900

Purchases A/c Dr. 900

To Suspense A/c 900

Profit & Loss Adj. A/c Dr. 900

To Purchases A/c 900

Suspense A/c Dr. 900

To Purchases A/c 900