What are the different types of errors that are usually committed in recording business transactions?
Keeping in view the nature of errors, all the errors can be classified into the following four categories :-
(i) Errors of Omission: The errors of omission are generally committed at the time of recording the transaction in the books of original entry or while posting to the ledger. This can further be classified in two different categories
(a) Error of complete omission
(b) Error of partial omission
When a transaction is completely omitted from recording in the books of original record, it is an error of complete omission and when the recording of transaction is partly omitted from the books, it is an error of partial omission.
(ii) Errors of Commission: These are the errors which are committed due to wrong posting of transactions, wrong totaling or balancing of the accounts, wrong casting of the subsidiary books or wrong recording of amount in the books of original entry etc.
(iii) Errors of Principle: 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.
(iv) Compensating Errors: When two or more errors are committed in such a way that the net effect of these errors on the debits and credits of accounts is nil, such errors are called compensating errors.
Which of following errors will be rectified through suspense account:
(a) Sales return book undercast by Rs. 1,000.
(b) Sales return by Madhu Rs. 1,000 not recorded.
(c) Sales return by Madhu Rs. 1,000 recorded as Rs. 100.
(d) Sales return by Madhu Rs. 1,000 recorded through purchases returns book.
If suspense account does not balance off even after rectification of errors it implies that:
(a) There are some one sided errors only in the books yet to be located.
(b) There are no more errors yet to be located.
(c) There are some two sided errors only yet to be located.
(d) There may be both one sided errors and two sided errors yet to be located.
A Trial balance is prepared:
(a) After preparation financial statement.
(b) After recording transactions in subsidiary books.
(c) After posting to ledger is complete.
(d) After posting to ledger is complete and accounts have been balanced.
If the trial balance agrees, it implies that:
(a) There is no error in the books.
(b) There may be two sided errors in the book.
(c) There may be one sided error in the books.
(d) There may be both two sided and one sided errors in the books.
Which of the following is not an error of commission:
(a) Overcasting of sales book.
(b) Credit sales to Ramesh 5,000 credited to his account.
(c) Wrong balancing of machinery account.
(d) Cash sales not recorded in cash book.
Depreciation written off on furniture 1,500 was not posted to depreciation account.
This is an error of ..................................
The wrong effect has been:
The correct effect should have been:
The rectification entry will be.
Trial balance is:
(a) An account.
(b) A statement.
(c) A subsidiary book.
(d) A principal book.
Record the rectification entry for the following transactions:
Credit sales to Rajni 5,000 recorded in Purchases book:
This is an error of ..........................................
State the wrong entry recorded in the book of accounts
Correct effect should have been:
The rectification entry will be:
Tick the Correct Answer
Agreement of trial balance is affected by:
(a) One sided errors only.
(b) Two sided errors only.
(c) Both (a) and (b).
(d) None of the above.
Which of the following is not an error of principle:
(a) Purchase of furniture debited to purchases account.
(b) Repairs on the overhauling of second hand machinery purchased debited to repairs account.
(c) Cash received from Manoj posted to Saroj.
(d) Sale of old car credited to sales account.
Name any two types of commonly used negotiable instruments.
Why is it necessary to record the adjusting entries in the preparation of final accounts?
State the meaning of incomplete records?
What is ‘Depreciation’?
Briefly state how the cash book is both journal and a ledger.
State the four basic requirements of a database applications.
Define accounting.
State the different elements of a computer system.
Why is it necessary for accountants to assume that business entity will remain a going concern?
State the need for the preparation of bank reconciliation statement?
The journal entry to record the sale of services on credit should include:
(a) Debit to debtors and credit to capital.
(b) Debit to cash and Credit to debtors.
(c) Debit to fees income and Credit to debtors.
(d) Debit to debtors and Credit to fees income.
State the causes of difference occurred due to time lag.
Explain, using examples, the relationship between the organisational MIS and the other functional information system in an organisation. Describe how AIS receives and provides information to other functional MIS.
Define the purpose of maintaining subsidiary journal.
Database is implemented using ........
Describe the brief history of accounting.
Describe the various types of accounting software along with their advantages and limitations.
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner.
Passbook is a copy of:
(a) Copy of customer Account (b) Bank column of cash book
(c) Cash column of cash book (d) Copy of receipts and payments
Deepti wants to buy a building for her business today. Which of the following is the relevant data for his decision?
a. Similar business acquired the required building in 2000 for ₹ 10,00,000
b. Building cost details of 2003
c. Building cost details of 1998
d. Similar building cost in August, 2005 ₹ 25,00,000