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NIOS Class 12 Accountancy Chapter 12 Errors and Their rectification
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Errors and Their rectification
Chapter: 12
| Module – 2: Trial Balance and Computers |
INTEXT QUESTIONS 12.1
1. Do the following errors affect the trial balance or not?
(Write ‘Yes’ if it affects and ‘No’ if it does not affect.)
(i) Sold goods of ₹3,200 to Anil Nayar, but it is not entered in the Sales Book.
Ans: No.
(ii) Purchased goods of ₹2,400 from Simran and is correctly entered in the Purchases Book but posted to the credit of her account in the ledger as ₹3,400.
Ans: Yes.
(iii) Total of the Purchases Book is incorrect.
Ans: Yes.
(iv) An amount of repair to building is debited to Building Account.
Ans: No.
INTEXT QUESTIONS 12.2
Following are some accounting errors. Write against each error the type (Error of omission, Error of principle, Compensating error, Error of commission):
(i) Purchase of Furniture is entered in the Purchase Book.
(Error of ___________)
Ans: Principle.
(ii) Repairs of building is debited to Building A/c.
(Error of ___________)
Ans: Principle.
(iii) Sales Book is totalled ₹15,000 instead of ₹14,600.
(Error of ___________)
Ans: Commission.
(iv) Mohan’s A/c was to be debited by ₹4,500 and Sohan’s A/c was to be debited by ₹5,500 while Mohan’s A/c was debited by ₹5,500 and that of Sohan’s A/c by ₹4,500.
(Error of ___________)
Ans: Compensating Error.
INTEXT QUESTIONS 12.3
(i) Cash received from Ashok ₹2,500 were posted to his account as ₹5,200. Accountant erased amount of ₹5,200 and wrote ₹2,500 in its place. Is he justified in doing so?
Ans: No.
(ii) Accountant corrected an error of writing ₹7,200 instead of ₹5,200 in the following manner. Is he justified to do so?
Ans: Yes.
(iii) Total of the Sales Book was overcast by ₹1,000. Accountant corrected the error in the following manner:
Amount as per Sales Book ₹1,000
On which side of the Sales A/c should he write the above amount?
Ans: Debit Side.
(iv) Wages paid ₹1,200 were omitted to be recorded in the Cash Book. What journal entry will be made to rectify the error?
Ans: Wages A/c Dr. ₹1200 To Cash A/c ₹1200.
INTEXT QUESTIONS 12.4
Answer the following in one sentence:
(i) When is Suspense A/c opened?
Ans: When Trial Balance Does Not Agree.
(ii) When does Suspense A/c disappear?
Ans: When Errors Responsible For Suspense Account Are Rectified.
(iii) What are two-sided errors?
Ans: Errors Which Affect Two Different Accounts On Same Sides Or Different Sides.
(iv) What type of errors are rectified through Suspense A/c?
Ans: One Sided Errors.
| TERMINAL EXERCISE |
1. State the meaning of Accounting Errors.
Ans: Accounting errors are mistakes made while recording, posting or preparing accounts in the books of a business.
2. Explain the following types of errors with suitable examples:
(a) Error of omission.
Ans: As a rule, a transaction is first recorded in books of accounts. However, accountant may not record it at all or record it partially. It is called an error of omission. For example, goods purchased on credit are not recorded in Purchases Book or discount allowed to a customer was not posted to Discount A/c in the ledger.
In the first case it is a complete omission. Therefore, both debit and credit are affected by the same amount. Therefore, it does not affect the Trial Balance.
The second example is the example of partial omission. It affects only one account i.e. Discount A/c. Therefore it affects Trial Balance.
(b) Compensating errors.
Ans: Two or more errors when committed in such a way that there is increase or decrease in the debit side due to an error, also there is corresponding decrease or increase in the credit side due to another error by the same amount. Thus, the effect on the account is cancelled out. Such errors are called compensating errors. For example, Sohan’s A/c is debited by Rs. 2500 while it was to be debited by Rs. 3500 and Mohan’s A/c is debited by Rs. 3500 while the same was to be debited by Rs. 2500. Thus, excess debit of Mohan’s A/c by Rs. 1000 is compensated by short credit of Sohan’s A/c by Rs. 1000.
(c) Error of principle.
Ans: Items of income and expenditure are divided into capital and revenue categories. This is the basic principle of accounting that the capital receipts and capital expenditure should be recorded as capital item and revenue income and revenue expenditure should be recorded as revenue item. If transactions are recorded in violation of this principle, it is called error of principle i.e. the capital item has been recorded as revenue item and revenue item is recorded as capital item. For example, ` 5000 spent on the repairs of building is debited to Building A/c while it should have been debited to Repair to Building A/c. It is a case of error of principle because expenditure on repairs of building is a revenue expenditure, while it has been debited to Building A/c taking it as an item of capital expenditure.
3. A businessman has prepared a trial balance of his firm that has agreed. He is satisfied that there are no accounting errors. Do you agree with him? If not, list the errors that do not affect the agreement of the trial balance.
Ans: No, I do not agree. Even if the Trial Balance agrees, errors may still exist.
Errors that do not affect Trial Balance:
(i) Error of omission.
(ii) Error of principle.
(iii) Wrong amount recorded in books.
(iv) Posting to wrong account on correct side.
4. When is a Suspense Account opened? How are errors rectified through Suspense A/c?
Ans: Suspense Account is opened when the Trial Balance does not agree, i.e., when the total of debit side is not equal to the total of credit side. The difference is temporarily placed in Suspense Account to make the Trial Balance agree.
If the debit side of Trial Balance is more, the difference is credited to Suspense A/c, and if the credit side is more, the difference is debited to Suspense A/c.
Suspense Account is a temporary account which shows the net effect of errors. It mainly includes one-sided errors.
Errors are rectified through Suspense Account by passing journal entries. While correcting, the correct account is debited or credited, and the corresponding entry is made in Suspense Account to complete the double entry.
For example, if an account is debited short, it is corrected by debiting that account and crediting Suspense A/c, and vice-versa.
5. Rectify the following errors:
(i) Goods purchased on credit for ₹8,200 not recorded in the Purchases Book.
Ans: Purchases A/c Dr. 8,200
To Supplier’s A/c 8,200
(Being credit purchase omitted now recorded).
(ii) Purchase Returns Book is overcast by ₹1,000.
Ans: Purchases Return A/c Dr. 1,000
To Suspense A/c 1,000
(Being Purchase Returns Book overcast corrected).
(iii) Salary of ₹3,200 paid to Gopal the accountant was debited to his personal account.
Ans: Salary A/c Dr. 3,200
To Gopal A/c 3,200
(Being salary wrongly debited to Gopal corrected).
(iv) Sales to Shakila of ₹2,400 was posted to her account.
Ans: No entry required.
(Being correct posting already done).
(v) Cash received from Suresh ₹2,000 was not entered in the books.
Ans: Cash A/c Dr. 2,000
To Suresh A/c 2,000
(Being cash received omitted now recorded).
6. Rectify the following errors:
(i) Purchases Book is undercast by ₹1,500.
Ans: Suspense A/c Dr. 1,500
To Purchases A/c 1,500
(Being Purchases Book undercast corrected).
(ii) Sales Return Book is overcast by ₹1,000.
Ans: Sales Return A/c Dr. 1,000
To Suspense A/c 1,000
(Being Sales Return Book overcast corrected).
(iii) Sales Book is added short by ₹100.
Ans: Suspense A/c Dr. 100
To Sales A/c 100
(Being Sales Book short addition corrected).
(iv) The total of Purchases Journal of ₹7,580 has been posted to Purchases Account as ₹5,780.
Ans: Purchases A/c Dr. 1,800
To Suspense A/c 1,800
(Being short posting corrected).
(v) The total of the page of Sales Journal of ₹24,750 was carried to next page as ₹27,450.
Ans: Sales A/c Dr. 2,700
To Suspense A/c 2,700
(Being excess carried forward corrected).
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