Trial Balance and Rectification of ErrorsClass 11 Financial Accounting 1 NCERT Solutions
21 Solutions
Generated by KedovoAI
Solution 1 of 21
Q1Questions for Practice
State the meaning of a trial balance?
Solution
A trial balance is a statement that shows the balances, or the total of debits and credits, of all the accounts in the ledger. It is prepared with the primary objective of verifying the arithmetical accuracy of the posting of entries from the journal to the ledger accounts. It acts as a summary of all ledger accounts on a specific date and is a crucial step in the accounting process before the preparation of financial statements.
Q2Questions for Practice
Give two examples of errors of principle?
Solution
Errors of principle occur when accounting entries are recorded in violation of fundamental accounting principles, typically due to an incorrect classification of expenditure or receipt between capital and revenue. Two examples are:
- Treating a capital expenditure as a revenue expenditure: For instance, if wages paid for the installation of new machinery are debited to the Wages Account instead of the Machinery Account.
- Treating a revenue expenditure as a capital expenditure: For example, if an amount spent on routine repairs of a building is debited to the Building Account instead of the Repairs and Maintenance Account.
Q3Questions for Practice
Give two examples of errors of commission?
Solution
Errors of commission are clerical errors that occur during the process of recording or posting transactions. These errors are not related to accounting principles but are due to mistakes in calculation, posting, or balancing. Two examples are:
- Posting the wrong amount: For example, credit sales of ₹ 5,000 to a customer are correctly recorded in the sales book but are posted to the customer's account as ₹ 500.
- Posting to the wrong side of an account: For instance, cash received from a debtor is correctly recorded
Q1Test Your Understanding - I
Indicate against each amount whether it is a debit or a credit balance, and prepare a trial balance as at March 31, 2014 based on the following balances:
Accounts Title Amount ₹ Capital 1,00,000 Drawings 16,000 Machinery 20,000 Sales 2,00,000 Purchases 2,10,000 Sales return 20,000 Purchases return 30,000 Wages 40,000 Goodwill 60,000 Interest received 15,000 Discount allowed 6,000 Bank overdraft 22,000 Bank loan 90,000 Debtors : Nathu 55,000 Roopa 20,000 Creditors : Reena 35,000 Ganesh 25,000 Cash 54,000 Stock on April 01, 2013 16,000
Solution
Identification of Balances
| Accounts Title | Balance Type |
|---|---|
| Capital | Credit |
| Drawings | Debit |
| Machinery | Debit |
| Sales | Credit |
| Purchases | Debit |
| Sales return | Debit |
| Purchases return | Credit |
| Wages | Debit |
| Goodwill | Debit |
| Interest received | Credit |
| Discount allowed | Debit |
| Bank overdraft | Credit |
| Bank loan | Credit |
| Debtors (Nathu + Roopa) | Debit |
| Creditors (Reena + Ganesh) | Credit |
| Cash | Debit |
| Stock on April 01, 2013 | Debit |
Trial Balance as at March 31, 2014
| Account Title | L.F. | Debit Balance (₹) | Credit Balance (₹) |
|---|---|---|---|
| Capital | 1,00,000 | ||
| Drawings | 16,000 | ||
| Machinery | 20,000 | ||
| Sales | 2,00,000 | ||
| Purchases | 2,10,000 | ||
| Sales Return | 20,000 | ||
| Purchases Return | 30,000 | ||
| Wages | 40,000 | ||
| Goodwill | 60,000 | ||
| Interest Received | 15,000 | ||
| Discount Allowed | 6,000 | ||
| Bank Overdraft | 22,000 | ||
| Bank Loan | 90,000 | ||
| Debtors (55,000+20,000) | 75,000 | ||
| Creditors (35,000+25,000) | 60,000 | ||
| Cash | 54,000 | ||
| Stock (Opening) | 16,000 | ||
| Total | 5,17,000 | 5,17,000 |
Q1Test Your Understanding - II
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:
Solution
This is an error of principle.
Wrong entry recorded in the book of accounts:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Purchases A/c | 5,000 | |
| To Rajni's A/c | 5,000 |
Correct effect should have been:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Rajni's A/c | 5,000 | |
| To Sales A/c | 5,000 |
The rectification entry will be:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Rajni's A/c | 10,000 | |
| To Purchases A/c | 5,000 | |
| To Sales A/c | 5,000 | |
| (Being credit sales to Rajni wrongly recorded in purchases book, now rectified) |
Q2Test Your Understanding - II
Furniture purchased from M/s Rao Furnishigs for ₹ 8,000 was entered into the purchases book. This is the error of ______ State the wrong entry recorded in the book of accounts Correct effect should have been: The rectification entry will be:
Solution
This is the error of principle.
Wrong entry recorded in the book of accounts:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Purchases A/c | 8,000 | |
| To M/s Rao Furnishings A/c | 8,000 |
Correct effect should have been:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Furniture A/c | 8,000 | |
| To M/s Rao Furnishings A/c | 8,000 |
The rectification entry will be:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Furniture A/c | 8,000 | |
| To Purchases A/c | 8,000 | |
| (Being furniture purchased wrongly debited to purchases account, now rectified) |
Q3Test Your Understanding - II
Cash sales to Radhika ₹ 15,000 was shown as receipt of commission in the cash book. This is the error of ______ State the wrong entry recorded in the book of accounts Correct effect should have been: The rectification entry will be:
Solution
This is the error of principle.
Wrong entry recorded in the book of accounts:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Cash A/c | 15,000 | |
| To Commission A/c | 15,000 |
Correct effect should have been:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Cash A/c | 15,000 | |
| To Sales A/c | 15,000 |
The rectification entry will be:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Commission A/c | 15,000 | |
| To Sales A/c | 15,000 | |
| (Being cash sales wrongly credited to commission account, now rectified) |
Q4Test Your Understanding - II
Cash received from Karim ₹ 6,000 posted to Nadeem. This is the error of ______ State the wrong entry recorded in the book of accounts: Correct effect should have been: The rectification entry will be:
Solution
This is the error of commission.
Wrong entry recorded in the book of accounts (posting effect):
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Cash A/c | 6,000 | |
| To Nadeem's A/c | 6,000 |
Correct effect should have been:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Cash A/c | 6,000 | |
| To Karim's A/c | 6,000 |
The rectification entry will be:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Nadeem's A/c | 6,000 | |
| To Karim's A/c | 6,000 | |
| (Being cash received from Karim wrongly credited to Nadeem's account, now rectified) |
Q1Test Your Understanding - III
Show the effect through Journal entries: Credit sales to Mohan ₹ 10,000 were posted to his account as ₹ 12,000 This is an error of ______ The wrong effect has been: The correct effect should have been: The rectification entry will be.
Solution
This is an error of commission.
The wrong effect has been:
Mohan's account has been debited with ₹ 12,000.
The correct effect should have been:
Mohan's account should have been debited with ₹ 10,000.
The rectification entry will be:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Suspense A/c | 2,000 | |
| To Mohan's A/c | 2,000 | |
| (Being excess debit to Mohan's account for credit sales, now rectified) |
Q2Test Your Understanding - III
Cash paid to Neha ₹ 2,000 was not posted to her account. This is an error of ................................ The wrong effect has been: The correct effect should have been: The rectification entry will be:
Solution
This is an error of partial omission.
The wrong effect has been:
Neha's account has not been debited with ₹ 2,000.
The correct effect should have been:
Neha's account should have been debited with ₹ 2,000.
The rectification entry will be:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Neha's A/c | 2,000 | |
| To Suspense A/c | 2,000 | |
| (Being omission of posting of cash paid to Neha's account, now rectified) |
Q3Test Your Understanding - III
Sales returns from Megha ₹ 1,600 were posted to her account as ₹ 1,000 . This is an error of ______ The wrong effect has been: The correct effect should have been: The rectification entry will be:
Solution
This is an error of commission.
The wrong effect has been:
Megha's account has been credited with ₹ 1,000.
The correct effect should have been:
Megha's account should have been credited with ₹ 1,600.
The rectification entry will be:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Suspense A/c | 600 | |
| To Megha's A/c | 600 | |
| (Being short credit to Megha's account for sales returns, now rectified) |
Q4Test Your Understanding - III
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:
Solution
This is an error of partial omission.
The wrong effect has been:
Depreciation account has not been debited with ₹ 1,500.
The correct effect should have been:
Depreciation account should have been debited with ₹ 1,500.
The rectification entry:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Depreciation A/c | 1,500 | |
| To Suspense A/c | 1,500 | |
| (Being omission of posting to depreciation account, now rectified) |
Q1Test Your Understanding - IV
Tick the Correct Answer (1) 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.
Solution
(a) One sided errors only.
Q2Test Your Understanding - IV
(2) 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.
Solution
(c) Cash received from Manoj posted to Saroj.
Q3Test Your Understanding - IV
(3) 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.
Solution
(d) Cash sales not recorded in cash book.
Q4Test Your Understanding - IV
(4) Which of following errors will be rectified through suspense account:
(a)
Sales return book undercast by ₹ 1,000 .
(b)
Sales return by Madhu ₹ 1,000 not recorded.
(c)
Sales return by Madhu Rs 1,000. recorded as ₹ 100 .
(d)
Sales return by Madhu ₹ 1,000 recorded through purchases returns book
Solution
(a) Sales return book undercast by ₹ 1,000 .
Q5Test Your Understanding - IV
(5) 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.
Solution
(b) There may be two sided errors in the book.
Q6Test Your Understanding - IV
(6) 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.
Solution
(a) There are some one sided errors only in the books yet to be located.
Q7Test Your Understanding - IV
(7) If wages paid for installation of new machinery is debited to wages Account, it is:
(a)
An error of commission.
(b)
An error of principle.
(c)
A compensating error.
(d)
An error of omission.
Solution
(b) An error of principle.
Q8Test Your Understanding - IV
(8) Trial balance is:
(a)
An account.
(b)
A statement.
(c)
A subsidiary book.
(d)
A principal book.
Solution
(b) A statement.
Q9Test Your Understanding - IV
(9) 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,
Solution
(d) After posting to ledger is complete and accounts have been balanced,