Accounting Process

84 Practice MCQs available for CA Foundation

Paper

Paper 1: Accounting

Exam Weightage

25-30%

Key Topics

Journal, Ledger, Trial Balance, Cash Book, Rectification

This chapter covers Journal, Ledger, Trial Balance, Cash Book, Rectification and is part of Paper 1: Accounting in the CA Foundation exam.

Exam Strategy Tip

This topic carries 25-30% weightage. Focus on understanding core concepts rather than memorizing.

Key Terms

Accrual Basis

A method of recording accounting transactions for revenue when earned and expenses when incurred, regardless of when cash is exchanged.

Trading Account

The first part of the final accounts prepared to ascertain the Gross Profit or Gross Loss from trading (buying and selling) activities during an accounting period. It includes opening stock, purchases, direct expenses, sales, and closing stock.

Profit and Loss Account

The second part of the final accounts that records all indirect incomes and indirect expenses to determine the Net Profit or Net Loss for the accounting period. It starts with Gross Profit from the Trading Account.

Goodwill

An intangible asset representing the good reputation, brand name, customer loyalty, and earning capacity of a business over and above its net tangible assets. It arises in accounting during partnership changes or business acquisitions.

Capital Expenditure

Expenditure incurred to acquire, improve, or extend the life of a fixed asset that provides benefit over more than one accounting period. It is shown as an asset in the Balance Sheet.

Comparison Tables

GDP vs GNP: National Income Accounting for CA Foundation Straight Line Method (SLM) vs Written Down Value (WDV): Accounting Guide Sole Proprietorship vs Partnership: Legal & Accounting Comparison

All 84 Questions

Accounting Standards can override the statute. [June 2024, 2 Marks]

What are the advantages of subsidiary books? [July 2021, 5 Marks; June 2024, 5 Marks]; [MTP Jan. 2025]

What are the importance of Journal? [June 2023, 5 Marks]

Double Entry System [Jan. 2025, 5 Marks]

Petty Cash Book [June 2022, 5 Marks]

Mercantile System of Accounting and Cash System of Accounting [Dec. 2021, 5 Marks]

Trade discount and Cash discount

The debit notes issued are used to prepare sales return book. [MTP & RTP Jan. 2025]

Trade Discount is a reduction granted by a supplier from the list price of goods/ m services on business considerations for prompt payment. [Nov. 2019, 2 Marks]

The Sale Book is kept to record both the cash and credit sales. [Jan. 2021, 2 Marks]

Cash book is a subsidiary book as well as a principal book. [July 2021, 2 Marks]

Discount column of the cash book is never balanced. [Dec. 2021, 2 Marks]

At the end of the accounting year, all the nominal accounts of the ledger book are balanced. [June 2022, 2 Marks]; [Sep. 2024, 2 Marks]; [MTP Jan. 2025]

Discount column of cash book records the trade discount. [Dec. 2023, 2 Marks]

Sale of office furniture should be credited to Profit and Loss Account. [RTP Jan. 2025]

A ledger is also known as the principal books of account. [Jan. 2025, 2 Marks]

Classify the following accounts into Personal, Real and Nominal: (a) Cash Account (b) Wages Account (c) Building Account (d) Calcutta Tramway Co. Account (e) East Bengal Club Account (f) Rent Account (g) Capital Account (h) Drawings Account (i) Interest Account (j) Trade Mark Account (k) Dividend Account (l) Land Account (m) Goodwill Account (n) Patent Account (o) Bad Debts Account (P) Bank Account (q) Discount Allowed Account (r) Interest Received Account (s) Discount Received Account (t) Salary Payable (u) Bills Receivable

From the following transactions prepare the Cash Book with cash and discount columns: Aug. 2016 Particulars Amount 1 Opening cash balance 2500 3 Received from D & Co. in full settlement of Rs. 1,400 1,350 4 Received for cash sales 1250 5 Paid to Rajesh & Co Rs. 775 in full settlement of his account for 800 7 Purchased office furniture 670 13 Paid for postal stamps 25 15 Paid for office rent for month of July, 2016 125 17 Used office cash for meeting personal expenses 150 19 $old goods on credit to Mr. Faithful 1700 20 Paid to Rajnikant in full settlement his account for Rs. 700 670 20 Deposited in the Bank all cash in excess of 1200

One of your clients Mr. X asked you to finalize his account for the year ended 31st March, 2022. As a basis for audit Mr. X furnished you with the following statement: Dr. Cr. X's Capital 4,668 X's Drawings 1,692 Leasehold Premises 2,250 Sales 8,250 Due from customers 1,590 Purchases 3,777 Purchase Return 792 Loan from Bank 768 Trade Expense 2,100 Trade Payable 1,584 Bills Payable 300 Salaries and Wages 1,800 Cash at Bank 678 Opening Inventory 792 Rent and Rates 1,389 Sales Return 294 16,362 16,362 The closing inventory was Rs. 1,722. Mr. X claims that he has recorded every transaction correctly as the trial balance is tallied. Check the accuracy of the above trial balance and give reasons for the errors, if any. [June 2022, 4 Marks]; [MTP Jan. 2025; Modified Figures-3X]

Prepare a Triple Column Cash book from the following transactions of M/s. Raj Agencies and bring down the balance for the start of next month: 2022 Particulars Amount March 1 Cash in hand 30,000 1 Cash at bank 1,20,000 2 Paid into bank 10,000 5 Bought furniture and issued cheque 15,000 8 Purchased goods for cash 5,000 12 Received cash from Mohan Discount, allowed to him 9,800 200 14 Cash sales 50,000 16 Paid to Lata by cheque Discount received 14,500 500 19 Paid into Bank 5,000 23 Withdrawn from Bank for Private expenses 6,000 24 Received cheque from Gupta Allowed him discount 14,300 200 26 Deposited Gupta's cheque into Bank 28 Withdrew cash from Bank for Office use 20,000 30 Paid rent by cheque 8,000 [Dec. 2022, 5 Marks]

Enter the following transactions in Sales Book of Gurgaon Engineers. Gurgaon for January, 2022: 2022 January 5 Sold to Praneet Electricals 10 pieces of microwaves@ Rs. 8,500 / -each less trade discount 15% 10 Sold to Ajanta plaza 8 pieces of Mixer grinders @ Rs. 12,500 /- each less trade discount 10% 20 Sold to Naveen traders, 15 pieces of juicers @ Rs. 5,500 / - each less trade discount 5% [June 2023, 4 Marks]

Prepare a Triple Column Cash Book from the following transactions of G. Enterprises for the month of Jan 2023. Date Particulars Amount 01/01/23 Cash in hand Cash at Bank 14,500 1,95,000 03/01/23 Received From K - Cash - Cheque - Discount allowed to him 7,300 15,000 400 06/01/23 Goods sold-for cash 9,100 07/01/23 Withdrew from bank by self-cheque 3,000 12/01/23 Issued a cheque to B Discount received 10,590 410 14/01/23 Received a cheque from R (in full settlement of her account Rs. 6,500) by cheque 6,350 17/01/23 Withdrew from bank for personal use 15,000 18/01/23 Paid electricity bill by cheque 5,000 20/01/23 Cash purchases of stationery 1,200 31/01/23 Deposit the entire cash in bank in excess of 10,000 [Dec. 2023, 5 Marks]

Pass journal entries for the following transactions in the books of Mr. Kapil: (i) Purchased goods from Sonu for Rs. 1,50,000 at a trade discount of 10% plus CGST and SGST @ 6% each. (ii) Sold goods to Mohit for Rs.50,000 and charged CGST and SGST @ 5% each. Out of the amount due 40% is received by cheque immediately. (iii) Goods costing Rs. 25,000 withdrawn for personal use. Such goods were purchased by paying CGST and SGST@ 6% each. (iv) Machinery purchased from M/ s, Bright Industries for Rs. 2,00,000 plus CGST and SGST@ 9% each. Paid Rs. 1,00,000 immediately by cheque and balance to paid after two months. [June 2024, 4 X 1 = 4 Marks]

Pass a journal entry in each of the following cases: (i) A running business was purchased by Mohan with following assets and liabilities: Cash Rs. 20,000, Land Rs. 40,000, Furniture Rs. 10,000, Stock Rs. 20,000, Creditors Rs. 10,000, Bank Overdraft Rs. 20,000. (ii) Sold goods to Gagandeep for RS. 1,00,000 at trade discount of 20% and charged IGST @12% (iii) Goods distributed by way of free samples Rs. 10,000. (iv) Goods of list price Rs. 40,000 returned by Gagandeep. (v) Kuldeep became an insolvent and could pay only 50 paise in a rupee. Amount due from him Rs. 6,000. [RTP Jan. 2025]

Prepare Sales Book of M/s. Alpha of Kanpur for March, 2024  Mar. 5 Sold to M/s. ABC 10 pieces of Chairs @ Rs. 5,000/- each less Trade Discount 5%.  Mar. 12 Sold to M/s. PQR 25 pieces of Tables@ Rs. 2,000/ - each less Trade Discount 10%.  Mar. 18 Sold to M/s. MTB 5 pieces of Recliner Chairs @ Rs. 11000/- each less Trade Discount 10%. Payment received through cash.  Mar. 28 Sold to M/ s. LMS 50 pieces of cupboards@ Rs. 10,000 / • each less Trade Discount 20%. [RTP Jan. 2025]

From the following transactions, prepare the Sales Return Book of Kay & Co. a readymade garments dealer: Date Particulars 06/12/2024 Return received from Aar Store 30 shirts @ Rs. 300 / - and 15 trousers @ Rs. 500/- each , Less: Trade Discount @ 8% 12/12/2024 Modern tailors returned 10 frocks (which were sold for cash) @ Rs. 200/- each. 16/12/2024 Return received from Tulip Store - 12 T-shirts @ Rs. 100/- each. Less: Trade discount @ 10%.

What are the types of errors & their effects on agreement of trial balance?

Suspense Account

Under or over-casting of a subsidiary book is an example of error of commission. [June 2023, 2 Marks]

If the effect of errors committed cancel out, the errors will be called compensating errors and the trial balance will disagree. [May 2018, 2 Marks]; [MTP Jan 2025]

If the amount is posted in the wrong account or i.t is written on the wrong side of the account, it is called error of principle. [May 2019, 2 Marks; June 2024, 2 Marks]

Purchase of office furniture & fixtures of Rs. 2,500 has been debited to General Expense Account. It is an error of omission, [Nov, 2020, 2 Marks]

If the errors are detected after preparing trial balance, then all the errors are rectified through suspense account. [June 2022, 2 Marks]

If the errors are detected after preparing trial balance, then all the errors are rectified through suspense account. [Dec 2022, 2 Marks]

The accountant of X prepared the Trial Balance for the year ended 31st March, 2016. But there was a difference and the accountant put the difference in Suspense Account. Rectify the following errors found and prepare the Suspense Account: (1) The total of the· Returns outward book, Rs. 420 has not been posted in the ledger. (2) Purchase of Rs. 350 from Y has been entered in the sales book. However, Y's A/c has been correctly entered. (3) A sale of Rs. 390 to Z has been credited to his account as Rs.290. (4) Old furniture sold for Rs. 5,400 had been entered as Rs. 4,500 in sales account. (5) Goods taken by proprietor Rs. 500 have not been entered in the books at all.

M/s. Applied Laboratories were unable to agree the Trial Balance as on 31st March, 2020 and have raised a suspense account for the difference. Next year the following errors were discovered: (i) Repairs made during, the year were wrongly debited to the building A/c- 12,500. (ii) The addition of the 'Freight' column in the purchase journal was short by 1,500. (iii) Goods to the value of ₹ 1,050 returned by a customer, Rani & Co., had been posted to the debit of Rani & Co. and also to sales returns. (iv) Sundry items of furniture sold for ₹30,000 had been entered in the sales book, the total of which had been posted to sales account. (v) A bill of exchange (received from Raja & Co.) for 20,000 had been returned by the bank as dishonored and had been credited to the bank and debited to bills receivable account. You are required to pass journal entries to rectify the above mistakes. [Nov. 2020, 5 Marks]; [MTP Jan. 2025; Modified]

Mr. Ratan was unable to agree the Trial Balance last year and wrote off the difference to the Profit and Loss Account of that year. Next year, he appointed a Chartered Accountant who examined the old books and found the following mistakes: (i) Purchase of a scooter was debited to conveyance account Rs. 30,000. Mr. Ratan charges 10% depreciation on scooter. (ii) Purchase account was over cast by ₹1,00,000. (iii) A credit purchase of goods from Mr. X for 20,000 was entered as sale. (iv) Receipt of cash from Mr. Anand was posted to the account of Mr. Bhaskar 10,000. (v) Receipt of cash from Mr. Chandu was posted to the debit of his account, 5,000. (vi) 5,000 due by Mr. Ramesh was omitted to be taken to the Trial Balance. (vii) Sale of goods to Mr. Ram for 20,000 was omitted to be recorded. (viii) Amount of 23,950 of purchase was wrongly posted as ₹ 25,930. Suggest the necessary rectification entries. [July 2021, 10 Marks]; [RTP Jan. 2025; Modified]

Before preparation of the Trial Balance, the following errors were found in the books of Hare Rama & Sons. Give the necessary entries to correct them: (i) Minor Repairs made to the building amounting to 1,850 were debited to the Building Account. (ii) An amount of ₹ 3,000 due from Shayam Lal, which had been written off as bad debts in the previous year, recovered in the current year, and had been posted to the personal Account of Shayam Lal. (iii) Furniture purchased for office use amounting to 20,000 has been entered in the purchase day book. (iv) Goods purchased from Ram Singh amounting to 8,000 have remained unrecorded so far. (v) College Fees of proprietor's son, 15,000 debited to the Audit fees Account. (vi) Receipt of 4,500 from Meet Kumar credited to the Pinki Rani. (vii) Goods amounting to ₹6,200 had been returned by a customer and were taken in to inventory, but no entry was made in the books. (viii) 1500 paid for wages to workmen for making office furniture had been charged to wages account. (ix) Salary paid to a clerk 12,000 has been debited to his personal Account. (x) A purchase of goods from Raghav amounting to 20,000 has been wrongly entered through the sales book. [Dec. 2022, 10 Marks]; [MTP Jan. 2025; Modified]

The Trial Balance of Mr. Sarvesh Kumar as on 31st March, 2024 did not tally and the difference was posted to Suspense Account. On a scrutiny of the books, the following errors were detected: (i) The total of Sales Returns Book for January 2024 has been casted short by 1,000. (ii) Freight paid for installation of a Machine 6,500 was posted to the Freight Account as 5,600. (iii) Goods of the value of 2,500 returned by a customer were entered in the Sales day Book and posted therefrom to the credit of his account. (iv) 18,000 paid for purchase of old Motorcycle for personal use of Mr. Sarvesh Kumar was debited to conveyance account. (v) A purchase of ₹ 6,700 had been posted to creditor's account as 6,000. (vi) Receipt of cash ₹ 5,000 from Mr. Avinash was posted to the debit of his account. (vii) A cheque for 2,500 received from Mr. Alok had been dishonoured and was posted to the debit of Mr. Ashok. (viii) Sale of 8,500 to Mr. Deepak was recorded in the sales book correctly but while posting in ledger credited to his account. (ix) The total of "Discount Allowed" column in the cash book for the month of December 2023 amounting to 3,800 was not posted. (x) Sale of old office table for 2,200 treated as sale of goods. You are required to pass necessary journal entries with narrations to rectify the above errors. [June 2024, 12 Marks]

Accounting Standards can override the statute. [June 2024, 2 Marks]

What are the advantages of subsidiary books? [July 2021, 5 Marks; June 2024, 5 Marks]; [MTP Jan. 2025]

What are the importance of Journal? [June 2023, 5 Marks]

Double Entry System [Jan. 2025, 5 Marks]

Petty Cash Book [June 2022, 5 Marks]

Mercantile System of Accounting and Cash System of Accounting [Dec. 2021, 5 Marks]

Trade discount and Cash discount

The debit notes issued are used to prepare sales return book. [MTP & RTP Jan. 2025]

Trade Discount is a reduction granted by a supplier from the list price of goods/ m services on business considerations for prompt payment. [Nov. 2019, 2 Marks]

The Sale Book is kept to record both the cash and credit sales. [Jan. 2021, 2 Marks]

Cash book is a subsidiary book as well as a principal book. [July 2021, 2 Marks]

Discount column of the cash book is never balanced. [Dec. 2021, 2 Marks]

At the end of the accounting year, all the nominal accounts of the ledger book are balanced. [June 2022, 2 Marks]; [Sep. 2024, 2 Marks]; [MTP Jan. 2025]

Discount column of cash book records the trade discount. [Dec. 2023, 2 Marks]

Sale of office furniture should be credited to Profit and Loss Account. [RTP Jan. 2025]

A ledger is also known as the principal books of account. [Jan. 2025, 2 Marks]

Classify the following accounts into Personal, Real and Nominal: | Account | | :-------------------------------- | | (a) Cash Account | | (b) Wages Account | | (c) Building Account | | (d) Calcutta Tramway Co. Account | | (e) East Bengal Club Account | | (f) Rent Account | | (g) Capital Account | | (h) Drawings Account | | (i) Interest Account | | (j) Trade Mark Account | | (k) Dividend Account | | (l) Land Account | | (m) Goodwill Account | | (n) Patent Account | | (o) Bad Debts Account | | (P) Bank Account | | (q) Discount Allowed Account | | (r) Interest Received Account | | (s) Discount Received Account | | (t) Salary Payable | | (u) Bills Receivable |

From the following transactions prepare the Cash Book with cash and discount columns:
| Date (Aug. 2016) | Particulars | Amount | | :--------------- | :--------------------------------------------------------- | :----- | | 1 | Opening cash balance | 2500 | | 3 | Received from

One of your clients Mr. X asked you to finalize his account for the year ended 31st March, 2022.
As a basis for audit Mr. X furnished you with the following statement:
| Particulars | Dr. (Rs.) | Cr. (Rs.) | | :------------------ | --------: | --------: | | X's Capital | | 4,668 | | X's Drawings | 1,692 | | | Leasehold Premises | 2,250 | | | Sales | | 8,250 | | Due from customers | 1,590 | | | Purchases | 3,777 | | | Purchase Return | | 792 | | Loan from Bank | | 768 | | Trade Expense | 2,100 | | | Trade Payable | | 1,584 | | Bills Payable | | 300 | | Salaries and Wages | 1,800 | | | Cash at Bank | 678 | | | Opening Inventory | 792 | | | Rent and Rates | 1,389 | | | Sales Return | 294 | | | **Total** | **16,362** | **16,362** |
The closing inventory was Rs. 1,722. Mr. X claims that he has recorded every transaction correctly as the trial balance is tallied. Check the accuracy of the above trial balance and give reasons for the errors, if any.
[June 2022, 4 Marks]; [MTP Jan. 2025; Modified Figures-3X]

Prepare a Triple Column Cash book from the following transactions of M/s. Raj Agencies and bring down the balance for the start of next month: | 2022 March | Particulars | Amount | | :--------- | :------------------------------------------ | :------- | | 1 | Cash in hand | 30,000 | | 1 | Cash at bank | 1,20,000 | | 2 | Paid into bank | 10,000 | | 5 | Bought furniture and issued cheque | 15,000 | | 8 | Purchased goods for cash | 5,000 | | 12 | Received cash from Mohan
Discount, allowed to him | 9,800
200 | | 14 | Cash sales | 50,000 | | 16 | Paid to Lata by cheque
Discount received | 14,500
500 | | 19 | Paid into Bank | 5,000 | | 23 | Withdrawn from Bank for Private expenses | 6,000 | | 24 | Received cheque from Gupta
Allowed him discount | 14,300
200 | | 26 | Deposited Gupta's cheque into Bank | | | 28 | Withdrew cash from Bank for Office use | 20,000 | | 30 | Paid rent by cheque | 8,000 |
[Dec. 2022, 5 Marks]

Enter the following transactions in Sales Book of Gurgaon Engineers. Gurgaon for January, 2022: 2022 January 5 Sold to Praneet Electricals 10 pieces of microwaves@ Rs. 8,500 / -each less trade discount 15% 10 Sold to Ajanta plaza 8 pieces of Mixer grinders @ Rs. 12,500 /- each less trade discount 10% 20 Sold to Naveen traders, 15 pieces of juicers @ Rs. 5,500 / - each less trade discount 5% [June 2023, 4 Marks]

Prepare a Triple Column Cash Book from the following transactions of G. Enterprises for the month of Jan 2023.
| Date | Particulars | Amount | | :--- | :---------- | -----: | | 01/01/23 | Cash in hand | 14,500 | | | Cash at Bank | 1,95,000 | | 03/01/23 | Received From K - Cash | 7,300 | | | - Cheque | 15,000 | | | - Discount allowed to him | 400 | | 06/01/23 | Goods sold-for cash | 9,100 | | 07/01/23 | Withdrew from bank by self-cheque | 3,000 | | 12/01/23 | Issued a cheque to B | 10,590 | | | Discount received | 410 | | 14/01/23 | Received a cheque from R (in full settlement of her account Rs. 6,500) by cheque | 6,350 | | 17/01/23 | Withdrew from bank for personal use | 15,000 | | 18/01/23 | Paid electricity bill by cheque | 5,000 | | 20/01/23 | Cash purchases of stationery | 1,200 | | 31/01/23 | Deposit the entire cash in bank in excess of 10,000 | |
[Dec. 2023, 5 Marks]

Pass journal entries for the following transactions in the books of Mr. Kapil:
* (i) Purchased goods from Sonu for Rs. 1,50,000 at a trade discount of 10% plus CGST and SGST @ 6% each. * (ii) Sold goods to Mohit for Rs.50,000 and charged CGST and SGST @ 5% each. Out of the amount due 40% is received by cheque immediately. * (iii) Goods costing Rs. 25,000 withdrawn for personal use. Such goods were purchased by paying CGST and SGST@ 6% each. * (iv) Machinery purchased from M/ s, Bright Industries for Rs. 2,00,000 plus CGST and SGST@ 9% each. Paid Rs. 1,00,000 immediately by cheque and balance to paid after two months.
[June 2024, 4 X 1 = 4 Marks]

Pass a journal entry in each of the following cases: (i) A running business was purchased by Mohan with following assets and liabilities: | Particulars | Amount (Rs.) | | :---------------- | -----------: | | **Assets:** | | | Cash | 20,000 | | Land | 40,000 | | Furniture | 10,000 | | Stock | 20,000 | | **Liabilities:** | | | Creditors | 10,000 | | Bank Overdraft | 20,000 |
(ii) Sold goods to Gagandeep for RS. 1,00,000 at trade discount of 20% and charged IGST @12%
(iii) Goods distributed by way of free samples Rs. 10,000.
(iv) Goods of list price Rs. 40,000 returned by Gagandeep.
(v) Kuldeep became an insolvent and could pay only 50 paise in a rupee. Amount due from him Rs. 6,000. [RTP Jan. 2025]

Prepare Sales Book of M/s. Alpha of Kanpur for March, 2024 | Date | Particulars (Customer & Item) | Quantity | Rate (per piece) | Trade Discount | | :--- | :----------------------------- | :------- | :---------------- | :------------- | | Mar. 5 | Sold to M/s. ABC - Chairs | 10 pieces | @ Rs. 5,000/- each | 5% | | Mar. 12 | Sold to M/s. PQR - Tables | 25 pieces | @ Rs. 2,000/- each | 10% | | Mar. 18 | Sold to M/s. MTB - Recliner Chairs (Payment received through cash) | 5 pieces | @ Rs. 11,000/- each | 10% | | Mar. 28 | Sold to M/s. LMS - Cupboards | 50 pieces | @ Rs. 10,000/- each | 20% | [RTP Jan. 2025]

From the following transactions, prepare the Sales Return Book of Kay & Co. a readymade garments dealer: | Date | Particulars | | :--------- | :----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

What are the types of errors & their effects on agreement of trial balance?

Suspense Account

Under or over-casting of a subsidiary book is an example of error of commission. [June 2023, 2 Marks]

If the effect of errors committed cancel out, the errors will be called compensating errors and the trial balance will disagree. [May 2018, 2 Marks]; [MTP Jan 2025]

If the amount is posted in the wrong account or i.t is written on the wrong side of the account, it is called error of principle. [May 2019, 2 Marks; June 2024, 2 Marks]

Purchase of office furniture & fixtures of Rs. 2,500 has been debited to General Expense Account. It is an error of omission, [Nov, 2020, 2 Marks]

If the errors are detected after preparing trial balance, then all the errors are rectified through suspense account. [June 2022, 2 Marks]

If the errors are detected after preparing trial balance, then all the errors are rectified through suspense account. [Dec 2022, 2 Marks]

The accountant of X prepared the Trial Balance for the year ended 31st March, 2016. But there was a difference and the accountant put the difference in Suspense Account. Rectify the following errors found and prepare the Suspense Account: (1) The total of the· Returns outward book, Rs. 420 has not been posted in the ledger. (2) Purchase of Rs. 350 from Y has been entered in the sales book. However, Y's A/c has been correctly entered. (3) A sale of Rs. 390 to Z has been credited to his account as Rs.290. (4) Old furniture sold for Rs. 5,400 had been entered as Rs. 4,500 in sales account. (5) Goods taken by proprietor Rs. 500 have not been entered in the books at all.

M/s. Applied Laboratories were unable to agree the Trial Balance as on 31st March, 2020 and have raised a suspense account for the difference. Next year the following errors were discovered: (i) Repairs made during the year were wrongly debited to the building A/c- 12,500. (ii) The addition of the 'Freight' column in the purchase journal was short by 1,500. (iii) Goods to the value of ₹ 1,050 returned by a customer, Rani & Co., had been posted to the debit of Rani & Co. and also to sales returns. (iv) Sundry items of furniture sold for ₹30,000 had been entered in the sales book, the total of which had been posted to sales account. (v) A bill of exchange (received from Raja & Co.) for 20,000 had been returned by the bank as dishonored and had been credited to the bank and debited to bills receivable account. You are required to pass journal entries to rectify the above mistakes. [Nov. 2020, 5 Marks]; [MTP Jan. 2025; Modified]

Mr. Ratan was unable to agree the Trial Balance last year and wrote off the difference to the Profit and Loss Account of that year. Next year, he appointed a Chartered Accountant who examined the old books and found the following mistakes: 1. Purchase of a scooter was debited to conveyance account Rs. 30,000. Mr. Ratan charges

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depreciation on scooter. 2. Purchase account was over cast by ₹1,00,000. 3. A credit purchase of goods from Mr. X for 20,000 was entered as sale. 4. Receipt of cash from Mr. Anand was posted to the account of Mr. Bhaskar 10,000. 5. Receipt of cash from Mr. Chandu was posted to the debit of his account, 5,000. 6. 5,000 due by Mr. Ramesh was omitted to be taken to the Trial Balance. 7. Sale of goods to Mr. Ram for 20,000 was omitted to be recorded. 8. Amount of 23,950 of purchase was wrongly posted as ₹ 25,930. Suggest the necessary rectification entries. [July 2021, 10 Marks]; [RTP Jan. 2025; Modified]

Before preparation of the Trial Balance, the following errors were found in the books of Hare Rama & Sons. Give the necessary entries to correct them: 1. Minor Repairs made to the building amounting to 1,850 were debited to the Building Account. 2. An amount of ₹ 3,000 due from Shayam Lal, which had been written off as bad debts in the previous year, recovered in the current year, and had been posted to the personal Account of Shayam Lal. 3. Furniture purchased for office use amounting to 20,000 has been entered in the purchase day book. 4. Goods purchased from Ram Singh amounting to 8,000 have remained unrecorded so far. 5. College Fees of proprietor's son, 15,000 debited to the Audit fees Account. 6. Receipt of 4,500 from Meet Kumar credited to the Pinki Rani. 7. Goods amounting to ₹6,200 had been returned by a customer and were taken in to inventory, but no entry was made in the books. 8. 1500 paid for wages to workmen for making office furniture had been charged to wages account. 9. Salary paid to a clerk 12,000 has been debited to his personal Account. 10. A purchase of goods from Raghav amounting to 20,000 has been wrongly entered through the sales book. [Dec. 2022, 10 Marks]; [MTP Jan. 2025; Modified]

The Trial Balance of Mr. Sarvesh Kumar as on 31st March, 2024 did not tally and the difference was posted to Suspense Account. On a scrutiny of the books, the following errors were detected: 1. The total of Sales Returns Book for January 2024 has been casted short by 1,000. 2. Freight paid for installation of a Machine 6,500 was posted to the Freight Account as 5,600. 3. Goods of the value of 2,500 returned by a customer were entered in the Sales day Book and posted therefrom to the credit of his account. 4. 18,000 paid for purchase of old Motorcycle for personal use of Mr. Sarvesh Kumar was debited to conveyance account. 5. A purchase of ₹ 6,700 had been posted to creditor's account as 6,000. 6. Receipt of cash ₹ 5,000 from Mr. Avinash was posted to the debit of his account. 7. A cheque for 2,500 received from Mr. Alok had been dishonoured and was posted to the debit of Mr. Ashok. 8. Sale of 8,500 to Mr. Deepak was recorded in the sales book correctly but while posting in ledger credited to his account. 9. The total of "Discount Allowed" column in the cash book for the month of December 2023 amounting to 3,800 was not posted. 10. Sale of old office table for 2,200 treated as sale of goods.
You are required to pass necessary journal entries with narrations to rectify the above errors.
[June 2024, 12 Marks]

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