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?
Name and explain different types of reserves in detail.
Select the Correct Answer:
A bank reconciliation statement is prepared by:
(a) Creditors (b) Bank
(c) Account holder in a bank (d) Debtors
The periodic total of purchases return journal is posted to :
(i) Purchase account
(ii) Profit and loss account
(iii) Purchase returns account
(iv) Furniture account
Fill in the Correct Words :
(a) Cash book is a ......... journal.
(b) In Journal proper, only......... discount is recorded.
(c) Return of goods purchased on credit to the suppliers will be entered in ...... Journal.
(d) Assets sold on credit are entered in .........
(e) Double column cash book records transaction relating to ......... and .........
(f) Total of the debit side of cash book is ......... than the credit side.
(g) Cash book does not record the ......... transactions.
(h) In double column cash book ......... transactions are also recorded.
(i) Credit balance shown by a bank column in cash book is .........
(j) The amount paid to the petty cashier at the beginning of a period is known as ......... amount.
(k) In purchase book goods purchased on ......... are recorded.
Total of these transactions is posted in purchase account :
(i) Purchase of furniture
(ii) Cash and credit purchase
(iii) Purchases return
(iv) Purchase of stationery
Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.
Describe the events recorded in accounting systems and the importance of source documents in those systems?
What practical difficulties are encountered by a trader due to incompleteness of accounting records?
Describe the informational needs of external users.
Explain the development and role of accounting.