c Cash account 11 Purchase of office furniture 1200 has been debited to General

C cash account 11 purchase of office furniture 1200

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(c) Cash account. 11. Purchase of office furniture `1,200 has been debited to General Expense Account. It is: Theory Questions 1. How does errors of omission differ from errors of commission? 2. What is error of principle and how does it affect Trial Balance? 3. When and how is Suspense account used to rectify errors? 1. The trial balance of Mr. W & H failed to agree and the difference `20,570 was put into suspense pending investigation which disclosed that:(i) Purchase returns day book had been correctly entered and totalled at `6,160, but had been posted to the ledger.(ii) Discounts received `1,320 had been debited to discounts allowed.(iii) The Sales account had been under added by `10,000.(iv) A credit sale of `1,470 had been debited to a customer account at `1,740.(v) A vehicle bought originally for `7,000 four years ago and depreciated to `1,200 had not been sold for `1,500 in the beginning of the year but no entries, other than in the bank account had been passed through the books.(vi) An accrual of `560 for telephone charges had been completely omitted. © The Institute of Chartered Accountants of India
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2.109ACCOUNTING PROCESS(vii) A bad debt of `1,560 had not been written off and provision for doubtful debts should have been maintained at 10% of Trade receivables which are shown in the trial balance at `23,390 with a credit provision for bad debts at `2,320.(viii) Tools bought for `1,200 had been inadvertently debited to purchases.(ix) The proprietor had withdrawn, for personal use, goods worth `1,960. No entries had been made in the books.Required:(i) Pass rectification entries without narration to correct the above errors before preparing annual accounts.(ii) Prepare a statement showing effect of rectification on the reported net profit before correction of these errors.2. On going through the Trial balance of Ball Bearings Co. Ltd. you find that the debit is in excess by `150. This was credited to “Suspense Account”. On a close scrutiny of the books the following mistakes were noticed:(1) The totals of debit side of “Expenses Account” have beeen cast in excess by ` 50.(2) The “Sales Account” has been totalled in short by `100.(3) One item of purchase of `25 has been posted from the day book to ledger as `250.(4) The sale return of `100 from a party has not been posted to that account though the Party’s account has been credited.(5) A cheque of `500 issued to the Suppliers’ account (shown under Trade payables) towards his dues has been wrongly debited to the purchases.(6) A credit sale of `50 has been credited to the Sales and also to the Trade receivables Account. You are required to (i) Pass necessary journal entries for correcting the above;(ii) Show how they affect the Profits; and (iii) Prepare the “Suspense Account” as it would appear in the ledger.
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