Question
What are the different classes of errors? Which of them do not affect a Trial Balance?
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Answer
Keeping in view their nature, errors can be classified into following four categories:
- Errors of Omission.
- Errors of Commission.
- Errors of Principle.
- Compensating Errors.
- Errors of Principle, i.e., errors which arise due to incorrect application of principles of accounting. Suppose on purchase of a typewriter or printer, Office Expenses Account is debited, Trial Balance will still match.
- Compensating Errors: If the effect of one error is cancelled by the effect of some other error or errors, Trial Balance will still match. Suppose, an amount of ₹ 10 received from A is not credited to his account and the total of the Sales Book is ₹ 10 in excess, the omission of credit to A's Account will be made up by the increased credit to the Sales Account; the Trial Balance will still match.
- Errors of complete omission.
- Posting correct amount on the correct side but in wrong account.
- Recording wrong amount in the books of original entry (but the recorded amount is correctly debited and credited).
- Recording both aspects of a transaction twice in the books of account.
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Enter the following transactions in Two-column Cash Book of Gaurav, Delhi:
| 2019 | ₹ | |||
| April 1 | Opening Balance of Cash in Hand | 1,00,000 | ||
| Opening Balance of Bank Overdraft | 5,00,000 | |||
| April 2 | Sold goods for cash, including CGST and SGST @ 6% each | 4,48,000 | ||
| April 3 | Sold goods including CGST and SGST @ 6% each against cheque and paid into bank the same day | 3,36,000 | ||
| April 5 | Sold goods to Reema, including IGST @ 12% | 1,12,000 | ||
| April 6 | Ram paid by cheque | 78,000 | ||
| Discount allowed | 2,000 | |||
| April 7 | Bought goods from Rahul, Gurugram for ₹ 40,000 plus CGST and SGST @ 6% each and paid him by cheque | 44,800 | ||
| Salary paid to staff by cheque | 2,20,000 | |||
| April 10 | Deposited into bank | 3,10,000 | ||
| April 11 | Received a cheque from Suresh and paid into bank | 1,28,500 | ||
| Discount allowed | 1,500 | |||
| April 15 | Received from R. Kumar a cheque for a full settlement of his account for ₹ 1,95,000 | 1,87,500 | ||
| April 18 | Paid wages in cash | 30,000 | ||
| April 20 | Bank charges, including CGST and SGST @ 6% each | 5,600 | ||
| April 22 | Withdrew from bank for office use | 1,00,000 | ||
| Withdrew from Bank for personal use | 1,20,000 | |||
| April 25 | Paid electricity bill by cheque | 31,500 | ||
| Issued a cheque in favour of Sudha as advance for purchase of house of Gaurav | 2,00,000 | |||
| April 26 | Received a cheque from Amar | 58,200 | ||
| Allowed discount to him | 1,800 | |||
| April 28 | Cheque received from Amar sent to bank | |||
| April 30 | Bank collected interest received on investments | 15,000 | ||
| Paid rent for the month of May, 2019, including CGST and SGST @ 6% each | 22,400 | |||
Gopal does not keep proper books of account. Following information is given below:
During the year he introduced ₹ 20,000 and withdrew ₹ 12,000 from the business. Prepare the statement of profit or loss on the basis of given information.
| April 01, 2016 | March 31, 2017 | |
| ₹ | ₹ | |
| Cash in hand | 18,000 | 12,000 |
| Cash at bank | 1500 | 2000 |
| Stock in trade | 80,000 | 90,000 |
| Sundry debtors | 36000 | 60,000 |
| Sundry creditors | 60,000 | 40,000 |
| Loan | 10,000 | 8,000 |
| Office equipments | 25,000 | 30,000 |
| Land and Buildings | 30,000 | 20,000 |
| Furniture | 10,000 | 10,000 |
Following is the Trial Balance as on 31st March 2016. Prepare Trading and Profit and Loss Account and Balance Sheet:
Additional Information:
→Additional Information:
- Stock on 31st March 2016 is ₹ 20,600.
- Depreciate machinery @ 10% p.a.
- Make a Provision @ 5% for Doubtful Debts.
- Provide $2\frac{1}{2}\%$ for discount on sundry debtors.
- Rent and Rates include security deposit of ₹ 400.
- Insurance prepaid ₹ 120.
On 1st July, 2016, Sohan Lal & Sons purchased a plant costing ₹ 60,000. Additonal plant was purchased on 1st January, 2017 for ₹ 40,000 and on 1st October, 2017, for ₹ 20,000, plus CGST and SGST @ 6% each. On 1st April, 2018, one-third of the plant purchased on 1st July, 2016, was found to have become obsolete and was sold for ₹ 6,000, charging CGST and SGST @ 6% each.
Prepare the Plant Account for the first three years in the books of Sohan Lal & Sons. Depreciation is charged @ 10% p.a. on Straight Line Method. Accounts are closed on 31st March each year.
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Ram Prashad keeps his books on Single Entry System and from them and the particulars supplied, the following figures were gathered together on 31st March, 2019:
Book Debts ₹ 10,000; Cash in Hand ₹ 510; Stock-in-Trade (estimated) ₹ 6,000; Furniture and Fittings ₹ 1,200; Trade Creditors ₹ 4,000; Bank Overdraft ₹ 1,000; Ram Prashad stated that he started business on 1st April, 2018 with cash ₹ 6000 paid into bank but stocks valued at ₹ 4,000. During the year he estimated his drawings to be ₹ 2,400. You are required to prepare the statement, showing the profit for the year, after writing off 10% for Depreciation on Furniture and Fittings.
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Mrs. Bhavana keeps his books by Single Entry System. You’re required to prepare final accounts of her business for the year ended March 31, 2017. Her records relating to cash receipts and cash payments for the above period showed the following particulars:
The following information is also available:
All her sales and purchases were on credit. Provide depreciation on plant and building by 10% and machinery by 5%, make a provision for bad debts by 5%.
The following information is also available:
All her sales and purchases were on credit. Provide depreciation on plant and building by 10% and machinery by 5%, make a provision for bad debts by 5%.
Gopal keeps incomplete records. On $1^{st}$ April, $2016, $ his position was as follows:
His position on $31^{st}$ March, $2017$ was as follows: Cash in hand $₹\ 3,000;$ Cash at Bank $₹\ 5,000;$ Stock $ ₹\ 44,000;$ Debtors $₹\ 21,000$; Fixed Assets $₹\ 80,000$; Creditors $₹\ 22,000$. You are informed that Gopal has taken stocks worth $₹\ 4,500$ for his private use and that he has been regularly transferring $₹\ 2,000$ per month from his business banking account by way of drawings. Out of his drawings he spent $₹\ 15,000$ for purchasing a Scooter for the business on $1$st October, $2016.$
You are requested to find out his profit or loss and to prepare the Statement of Affairs after considering the following:
→His position on $31^{st}$ March, $2017$ was as follows: Cash in hand $₹\ 3,000;$ Cash at Bank $₹\ 5,000;$ Stock $ ₹\ 44,000;$ Debtors $₹\ 21,000$; Fixed Assets $₹\ 80,000$; Creditors $₹\ 22,000$. You are informed that Gopal has taken stocks worth $₹\ 4,500$ for his private use and that he has been regularly transferring $₹\ 2,000$ per month from his business banking account by way of drawings. Out of his drawings he spent $₹\ 15,000$ for purchasing a Scooter for the business on $1$st October, $2016.$
You are requested to find out his profit or loss and to prepare the Statement of Affairs after considering the following:
- Depreciate Fixed Assets and Scooter by $10\%$ p.a.
- Write off Bad-Debts $₹\ 1,000$ and provide $5\%$ for doubtful debts on Sundry Debtors.
- Commission earned but not received by him was $₹\ 2,500.$
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