Trial Balance and Rectification of Errors Test - 5

Wages paid for the construction of building should be treated as a capital expenditure and debited to the buildings account. Instead if it is debited to the wages account, it has been treated as revenue expenditure.

Suspense account will be opened because the identity of the account responsible for the error is not known.

The recording of transaction has been partly omitted from the books, it is therfore an error of partial omission.

It is an error of commission and will therefore be disclosed by the trial balance.

Trial balance is prepared after the ledger accounts have been balanced to verify the arithmetical accuracy of posting into the ledger accounts.

Because it is a one sided error and trial balance is affected only by one sided errors.

The commission account was debited in excess by Rs.100, so it will now be credited by the same amount to rectify the error.

It is a statement showing the balances or totals of debits and credits of all the ledger accounts, with a view to verify the arithmetical accuracy of posting into the ledger accounts.

An account written off as bad can not be reopened if the amount (or a part of it) is recovered later. The amount recovered is treated as an income and credited to bad debts recovered account.

Trial balance is prepared to check the arithmetical accuracy of posting into the ledger accounts. If there are errors in posting, the totals of the two sides will not be equal.

It will not affect the trial balance because it is a two sided error.

Errors which are committed due to wrong posting of transactions, wrong totalling or balancing of the accounts, wrong casting of the subsidiary books, or wrong recording of amount in the books of original entry, etc constitute errors of commission.

Since one account has been debited in excess and one has been debited short, the two errors will neutralize each other.

Chetan's account has been debited in excess by 2700. So it will now be credited with the same amount. Suspense account will not be debited because the difference has not been transferred to suspense account.

Purchase book is a subsidiary book which has been casted/totalled short. So it is an error of wrong totalling of the subsidiary book.

If all the one sided errors have been identified and rectified, then the suspense account will have to necessarily balance.

Errors of commission always show up in the trial balance and therefore the trial balance helps to locate these errors.

Treating capital expenditure as revenue expenditure is an error of principle. Purchase journal is used for recording credit purchases of goods and not the assets.

Purchase account has been wrongly debited and machinery account should have been debited but was not.

When goods are given as charity, there is an outflow of the goods purchased. So the purchases account is credited.

it is an error of posting because the sale has not been posted to the customer's account.

Overcasting of the sales book implies that sales have been recorded in excess i.e., sales account has been credited in excess.

Subsidiary books record only one aspect of a transaction, either debit or credit. Error in casting of subsidiary book is therefore a one sided error which affects the agreement of trial balance.

(a) when a transaction is not recorded, it is an error of omission, (b) error in balancing of an account is an error of commission, (c) treatment of a capital expenditure as a revenue expenditure is an error of principle, (d) when two errors cancel the effect of each other, they are compensating errors.

Treating capital expenditure as revenue expenditure is an error of principle.