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Trial Balance and Rectification of Errors Test 36

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Trial Balance and Rectification of Errors Test 36
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  • Question 1
    1 / -0
    Income Tax appears in trial balance ____________ column.
    Solution
    Income tax is a payment and expenses. Expense are always debited. Hence Income tax appears in trial balance debit column. 
  • Question 2
    1 / -0
    Omission of Assets or Liabilities can be easily traced with the help of _____________.
    Solution
    Balance Sheet is prepared by incorporating all the assets and liabilities. Hence if any item of asset or liability is missed out, this can be revealed through balance sheet. 
  • Question 3
    1 / -0
    If the trial balance shows a short credit the suspense account will have a ________ balance.
    Solution
    Trial Balance is prepared by taking the balances of all ledger account. Trial balance is prepared to check the arithmetical accuracy.  If the total of debit and credit are tallied, it is proved that the books are arithmetically accurate. 
    In case of any error, rectification entries are to be passed. One of the methods of rectification of error involves use of suspense account.
    When the trial balance shows a short credit, suspense account will be used for the short amount to tally the trail balance and hence, it will have a credit balance to make the total equal. 
  • Question 4
    1 / -0
    Wages paid for installation of machinery wrongly debited to wages account is an error of __________.
    Solution
    Errors are classified as:
    • Error of Omission
    • Error of Commission
    • Error of Principle
    • Compensating error

    All the expenses paid for purchase of machinery should be debited to machinery account as its a capital expenditure.  Hence, Wages paid for installation of machinery debited to wages account is an error of principle.
  • Question 5
    1 / -0
    A transaction not recorded at all is called as an error of __________.
    Solution
    Accounting errors are classifies as:
    1) Error of Principle
    2) Error of Omission
    3) Error of Commission
    4) Compensating error

    When a transaction is omitted in recording in the books of account, this is an error of omission. 
    Hence, a transaction not recorded at all is called as an error of complete omission.
  • Question 6
    1 / -0
    If the trial balance does not agree, difference of the trial balance is placed to ________ account.
    Solution
    Trial Balance is prepared by taking the balances of all ledger account. Trial balance is prepared to check the arithmetical accuracy.  If the total of debit and credit are tallied, it is proved that the books are arithmetically accurate. 

    If the trial balance does not agree, difference of the trial balance is placed to suspense account. 
  • Question 7
    1 / -0
    Which of the following does not affect the agreement of trial balance?
    Solution

    Option D is correct one.

    Different types of errors which don’t affect the trial balance are :-

     Error of omission - Where in the full transaction is omitted from the books of accounts.

     Error of commission - Where we have entered the correct amounts but in wrong person’s account.

     Error of principle - This type of error takes place when an item is entered in wrong head or class of accounts.

     Error of compensation - Are that errors which cancel the effects of each other.

     Error of complete reversal of entries - These errors occur when we debit and credit the two or more aspects of a transaction wrongly using correct figures or amounts.

  • Question 8
    1 / -0
    When transaction has been recorded in total disregard to the fundamentals of double entry system, the mistake or error is called errors of ______.
    Solution
    Accounting entries are recorded as per the generally accepted accounting principles. If any of these principles are violated or ignored, errors resulting from such violation are known as errors of principle. An error of principle may occur due to incorrect classification of expenditure or receipt between capital and revenue. This is very important because it will have an impact on financial statements. It may lead to under/over stating of income or assets or liabilities, etc. 
  • Question 9
    1 / -0
    If transactions are not recorded in the books of account as per fundamental rules of accounts, such error is said to be an error of _________.
    Solution
    Accounting errors are classified as:
    1) Error of Principle
    2) Error of omission
    3) Error of commission
    4) Compensating error

    Error of principle are those where the fundamental rules of accounting are not followed. For example, capital expenditure are debited to account as revenue expenditure or vice-versa. 

    If transactions are not recorded in the books of account as per fundamental rules of accounting, error is said to be error of principle. 
  • Question 10
    1 / -0
    Inclusion of freight paid on purchase of an office equipment in freight account is an example of error of _________.
    Solution
    While doing the accounting, if the basic rule of accounting is not followed, there is an error of principle.
    For example, freight paid on purchase of equipment is debited to freight  account. Its an error of principle as capital expenditure is debited as revenue expenditure. This will affect the profitability of the business. But in such case, there will be no affect on agreement of trial balance. 
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