Question by CA (Dr.) G.S.GREWAL– Series 15

  1. ₹ 5,000 spent on repairing of second hand machinery purchased is transferred to repairs A/c. It is an error of Commission.
  1. Preparation of a trial balance helps in locating ____________________.
  1. Errors which affect one account are:

(a)     Errors of omission

(b)     Errors of principle

(c)     Error of posting

(d)     Error of commission

Answer – Series 15

  1. False

Reason: Expense incurred to make the asset ready for use is a capital expenditure. Expenditure incurred on repair of second hand machinery to make it ready for use should be debited to Machinery Account and not to Repairs account. It is thus, an error of principle.

  1. errors
  2. (d)

Reason:  Error of commission means error arising due to writing of wrong amount, wrong posting, wrong casting, wrong amount being posted and wrong balancing of account etc., in brief, it arises due to incorrect recording of transactions either wholly or partially. One side errors are those errors in which one aspect is correctly recorded but the other side is incorrectly recorded. Thus, it can be categorized as Error of Commission.

Question – Series 23

  1. ₹ 5,000 spent on repairing of second hand machinery purchased is recorded as Repairs. It is an error of Commission.
  1. Errors which affect one account can be ________________________.
  1. An amount of ₹ 5,000 paid to Yogesh against an acceptance was debited to Ranjan’s Account. The rectification of error will:

(a)     increase in Net Profit

(b)     reduce the Net Profit

(c)     have no effect on the Net Profit

(d)     increase the Assets

Answer – Series 23

  1. False

Reason: Expense incurred to make the asset ready for use is a capital expenditure. Expenditure incurred on repair of second hand machinery to make it ready for use and therefore should be debited to Machinery Account and not to Repairs Account. It is thus, an Error of Principle.

  1. Errors of Omission
  2. (c)

Reason: The rectification will have no effect on the net profit as it is a case of wrong debit to personal accounts.

Question – Series 31

  1. On the basis of nature of errors, all the errors are broadly classified under four categories.
  1. Salary paid was not posted to salary account leads to difference in trial balance on ____________ side.
  1. Which of the following errors will not affect the Trial Balance?

(a)     Wrong balance of an account.

(b)     Wrong totalling of an account.

(c)     Writing an amount in the wrong account but on the correct side.

(d)     Omission of an account from Trial Balance.

Answer – Series 31

  1. True

Reason: Errors can be classified into following four categories:

  • Errors of Omission
  • Errors of Commission
  • Errors of Principle
  • Compensating Errors

2. debit

3. (c)

Reason: Writing an amount in the wrong account but on the correct side will not affect Trial Balance. The amount is posted on the correct side but on the wrong account.

Question – Series 35

  1. Error of commission arises when any transaction is left out either wholly or partially.
  2. A Bill Receivable of ₹ 500 was dishonoured and credited as ₹ 50. The error will be rectified by crediting Bills Receivable by ___________.
  3. Discount allowed ₹ 93 to Mohan has been credited to his account by ₹ 39. The error will be rectified by

(a)     Crediting Mohan by ₹  54

(b)     Debiting Mohan by ₹  54

(c)     Debiting discount by ₹  54

(d)     Crediting discount by ₹  54

Answer – Series 35

  1. False

Reason: Error of Commission means error arising due to writing of wrong amount, wrong posting, wrong casting, wrong amount being posted and wrong balancing of account etc. In brief, due to incorrect recording of transactions either wholly or partially.

  1. 450
  2. (a)

Reason: Mohan’s Account has been short credited by ₹  54. It will be rectified by crediting his account by ₹  54.

Question Series – 44

  1. A Bill Receivable of ₹ 500 was dishonoured and credited as ₹ 50. The error will be rectified by crediting bills receivable by ₹  450.
  2. An amount of ₹ 5,000 paid to Yogesh against an acceptance was debited to Ranjan’s Account. The rectification of the error will have ________________ on the net profit.
  3. Cartage paid ₹ 50 for the newly purchased machinery, it is debited to cartage account will effect:

(a) Both the cartage and machinery account

(b) only machinery account

(c) only cartage account

(d) Trading account

Answer Series – 44

  1. False

Reason: Bills Receivable on being dishonoured has been credited by ₹  50 instead of ₹  500, meaning it is short credited by ₹  450. It will be rectified by crediting Bills Receivable by ₹  450.

  1. no effect
  2. (a)

Reason: An error of principle has been committed. Cartage was paid for a new machine and thus, should have been debited to Machinery Account and not Cartage Account. It will thus, effect both Cartage and Machinery Account.

Question Series – 45

  1. Debentures are not an example of Current Liabilities.
  2. X paid wages ₹ 10,000 this can be treated as ___________________.
  3. Select the correct statement:

(a) Bank overdraft is a current liability.

(b) Outstanding rent is a fixed liability.

(c) Bills Receivable is a fixed asset.

(d) Patent is a tangible asset.

Answer Series – 45

  1. True

Reason: Debentures is not an example of current liabilities. Debentures is a liability that extends beyond a period of 12 months usually they are for a period of 5, 10, 15 years etc. Bills Payable and Creditors are examples of Current Liabilities as they are payable within the period of 12 months.

  1. transaction
  2. (a)

Reason: Current liabilities are those liability which are payable within 12 months, therefore the bank overdraft is a current liability as it is payable within 12 months.

Question Series – 52

  1. Cartage paid ₹ 50 for the newly purchased machinery, if debited to Cartage Account will affect both the cartage and machinery account.

2 An amount of ₹  2,000 written off as bad, was received from Rohan and was credited to his personal account. The rectification of this entry will _____________net profit by ₹  2,000.

  1. Bills Receivable of ₹ 5,000 was discounted from the bank. It was dishonoured on the due date. In the Books of Account the dishonour of bill was recorded for ₹ 500. The error will be rectified by:

(a)     Crediting debtor by ₹  4,500

(b)     Crediting Bills Receivable by ₹  4,500

(c)     Debiting Bills Receivable by ₹  4,500

(d)     Debiting Debtor by ₹  4,500

Answer Series – 52

  1. True

Reason: An Error of Principle has been committed. Cartage was paid for a new machine and thus, should have been debited to Machinery Account and not Cartage Account. It will thus, effect both Cartage and Machinery Account.

  1. increase
  2. (d)

Reason: At the time of Discounting Bills Receivable Account would have been credited. On being dishonoured, Debtor’s Account should have been debited but with the wrong amount i.e., ₹  500. The mistake will be rectified by debiting the Debtor’s Account by further ₹ 4,500.

Question – Series 60

  1. Error of principle is not disclosed by the Trial Balance.
  2. The disagreement of a Trial Balance indicates that an _________________ has been committed.
  3. Goods worth ₹ 50 given as charity should be credited to

(a)     Charity Account

(b)     Sales Account

(c)     Purchases Account

(d)     Purchases Return Account

Answer – Series 60

  1. True

Reason: Error of Principle do not affect the Trial Balance as amounts are placed on the correct side but in wrong account.

  1. error
  2. (c)

Reason: Goods given as charity is credited to Purchases Account.

Question – Series 61

  1. Error of principle is not disclosed by the Trial Balance.
  2. The disagreement of a Trial Balance indicates that an _________________ has been committed.
  3. ₹ 200 received from Smith whose account was previously written off as Bad Debt should be credited to

(a)     Bad Debt Recovered Account

(b)     Smith’s Account

(c)     Cash

Answer – Series 61

  1. True

Reason: Error of Principle do not affect the Trial Balance as amounts are placed on the correct side but in wrong account.

  1. error
  2. (c)

Reason: Goods given as charity is credited to Purchases Account.

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