FINANCIAL ACCOUNTING (MGT101) ASSIGNMENT - 01 Solution and Disscussion Due Date: 17 FEB 2014

[♦_"Rim Jhim"_♦]

FINANCIAL ACCOUNTING (MGT101)

 

NON-GRADED ASSIGNMENT - 01

 

By Non- graded, we mean that it will not be included in your semester GPA (No weightage in final marks).

 

TOPIC TO BE TESTED:

 

DUE DATE: 17^TH FEBRUARY 2014

 

• “Rectification of Errors”

 

LEARNING OBJECTIVES:

 

• To develop an understanding about rectifying the errors in the books of accounts.

 

 

ASSIGNMENT QUESTION

 

Following errors have been found in the books of ABC Corporation which maintained their accounting record under periodic inventory system.

 

S.No.		Found Errors

₁               Sale of goods worth Rs. 10,000 on credit basis to Mr. A was wrongly passed through the purchase book.

 

₂               Purchase of goods amounting to Rs. 20,000 from Mr. B was wrongly passed through the sales book.

 

₃               An amount of Rs. 5,000 paid for the installation of plant and machinery was wrongly debited to wages account.

 

4                Sale of old furniture amounting to Rs. 10,000 was passed through the sales book.

 

₅               A purchase of Rs. 2,000 from Mr. C was wrongly passed through the return outwards book.

 

6                A sale of Rs. 3,000 to Mr. D was wrongly passed through the return inwards book.

 

7                Goods sold to Mr. Y of Rs. 945 have been wrongly entered in the sales book as Rs. 495.

 

8                Return inwards of Rs. 1,000 from Mr. Z was omitted to record in the books of accounts.

 

 

 

Required:

 

Pass the rectified journal entries in the books of accounts.

IMPORTANT:

 

Grace period of extra 24 hours after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

 

IMPORTANT INSTRUCTIONS

 

• Take help from internet for collecting the information.

 

• Carefully watch relevant lectures and consult the relevant material from handouts along with recommended books.

 

• Attempt the assignment by yourself and it will be entertained positively.

 

OTHER IMPORTANT INSTRUCTIONS:

 

DEADLINE:

 

• Make sure to upload the solution file before the due date on VULMS.

 

• Any submission made via email after the due date will not be accepted.

 

FORMATTING GUIDELINES:

 

• Use the font style “Times New Roman” or “Arial” and font size “12”.

 

• It is advised to compose your document in MS-Word format.

 

• You may also compose your assignment in Open Office format.

 

• Use black and blue font colors only.

 

 

RULES FOR MARKING

 

Please note that your assignment will not be graded or graded as Zero (0), if:

 

• It is submitted after the due date.

 

• The file you uploaded does not open or is corrupt.

 

• It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.

 

• It is cheated or copied from other students, internet, books, journals etc.
• Accounts involved are incorrectly mentioned in the given table of assignment even if the rules of debit and credit are correctly mentioned. So be careful to mention the accounts involved against each transaction.

 

Note related to load shedding: Please be proactive Dear students!

 

As you know that Post Mid-Term semester activities have been started and load shedding problem is also prevailing in our country now a days. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.

 

[+ M.Tariq Malik]

Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

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Assignment (Non-Graded)

FINANCIAL ACCOUNTING (MGT101)

 

Dear Students!

 

This is to inform that a Non-Graded Assignment will be opened on February 12, 2014 and due date of assignment submission will be February 17, 2014.`

[+ M.Tariq Malik]

Q. How errors can be rectified?

Rectification of Errors: Errors Effecting One Account   These Types pf errors may occur due to the following reasons: 1. Wrong Castings 2. Wrong Balancing 3. Wrong Posting   These errors are not difficult to locate. These are located during the course of preparation of the trial balance. Hence, there is no need to pass any journal entry to rectify these errors. The error is rectified by giving proper explanatory note or by crossing the wrong figure with red ink line and writing the correct figure above the crossed out figures. However, if the error is discovered after finalization of the Trial Balance, a journal entry is passed with the help of a Suspense Account.   1. Error of Casting: Casting is a process of totaling the amount of transaction at the end of a certain period. It is a mistake in totaling the books of original entry. Observe the following: Sales Book Year     1992 April 5 April 15 April 16 April 24 Amrita Anita Hira Chanda 1,500 2,000 1,400 1,000     4,900   The correct total should be Rs. 5,900.   2. Error of carry forward/brought forward: This type of error occurs when the total of one page is copied wrongly on the next page. In this case, the same procedure as discussed above should be followed.   3, Error of Posting: Error of posting may be of two types: a) Posting to correct account but either with wrong amount or on wrong side or both. b) Posting to wrong account with correct amount or wrong amount or wrong side with wrong amount. Type (a) error of posting affects only one account whereas type (b) error affects two accounts. While correcting the mistake at the posting stage, it should be presumed that the transaction has been recorded correctly in the books of original entry.   Errors Effecting two or more Account Such errors may include: 1. Errors of Omission 2. Errors of Recording 3. Errors of posting to wrong account 4. Errors of principle   1. Errors of Omission This type of error occurs when the transaction is omitted from being recorded in the books of accounts. The omission affects the subsidiary book and the individual account of the item not recorded in the subsidiary books. E.g. Purchase of goods Rs. 5,000 from X & Co. is omitted. In this case, two accounts are affected. Purchase Account as the total of Purchase Book is added short by Rs. 5,000. Personal Account of X & Co. will be affected. Purchase of Rs. 5,000 is not credited to X & Co.’s Account. Hence the rectification entry will be: Purchase A/c  Dr.                   5,000             To X & Co.’s A/c         5,000   2. Errors of Recording The transaction recorded in a wrongful manner affects two accounts as follows: a) It affects the total of the particular book and the concerned account of that book b) The individual account is also affected.   E.g. Goods worth Rs. 450 returned by Ajay recorded as Rs. 45. In this transaction, Return Inward Book shows an entry of Rs. 45 as against Rs. 450. Similarly, Mr. Ajay’s Account is also affected as it is posted with wrong amount. The rectification entry will be: Return Inwards A/c     Dr.       405             To Ajay’s A/c               405   3. Error of principle This type of error occurs when the principle of accounting is violated. Such an error distorts the profit or loss. At this stage following points should be remembered: a) when as asset is purchased: i) It should be debited to Asset Account and not to Purchase Account. ii) All expenses regarding purchase of an asset and its installation should be debited to the respective Asset Account and not to Expense Account. iii) Amount spent on repairs of the second hand asset purchased should be debited to the respective Asset Account and not to Repairs Account.   b) When as asset is sold: i) It should be credited to Asset Account and not to Sales Account ii) Any expenses incurred in connection with sales should be debited to Asset Account and not to the Expenses Account.

[+ M.Tariq Malik]

MGT101 - Financial Accounting Assignments No.01 Solution Fall 2013

[Ahsan Bilal (M A/C &Finance)]

how u enter suspense acount when u know the both acounts???

[+ M.Tariq Malik]

Rectification Entries:
1 Debit: Suspense Account 2,000
Credit: Purchase A/C 1,000
Credit: Sales A/C 1,000
2) Debit: Purchase Account 2,000 
Debit: Sales Account 2,000
Credit: Suspense Account 4,000
3) Debit: Installation of Plant 5,000
& Machinary A.C 
Credit: Wages A/C 5,000
4) Debit: Sales A/C 10,000
Credit: Furniture A/C 10,000
5) Debit: Purchase A/C 2,000
Credit: Return Outward A/C 2,000
6) Debit: Return inward 3,000
Credit: Sales A/C 3,000

[+ M.Tariq Malik]

Serial #	Description/Particulars	V/No       L/F	Debit      Rs.	Credit      Rs.
	Suspense Account		2,000
	Purchase Account			1,000
	Sales Account			1,000
	Purchase Account		2,000
	Sales Account		2,000
	Suspense Account			4,000
	Installation of Plants & Machinary		5,000
	Wages Account			5,000
	Sales Account		10,000
	Furniture Account			10,000
	Purchase Account		2,000
	Return Outward			2,000
	Return Outward		3,000
	Sales Account			3,000

Students chk kr ke btayain me right or wrong.

[+ M.Tariq Malik]

MGT101 , Lecture 28 , page 188

RECTIFICATION OF ERROR

In financial accounting, every single event occurring in monetary terms is recorded. Sometimes, it just so

happens that some events are either not recorded or it is recorded in the wrong head of account or wrong

figure is recorded in the correct head of account.

Whatever the reason may be, there is always a chance of error in the books of accounts. These errors in

accounting require rectification. The procedure adopted to rectify errors in financial accounting is called

"Rectification of error"

HOW TO RECTIFY THESE ERRORS

One way of rectification is that we can simply erase or overwrite the incorrect entry and replace it with the

correct one. But this practice is not allowed in accounting. We have to Rectify / correct the mistake by

recording another entry.

TYPES OF ERRORS

Before going to the rectification process, let's first see the different kinds of errors that can appear in our

books of accounts:

ERROR OF OMISSION

One of the most common errors is that an event escapes recording. This means that an event occurred but

we did not record it. For example, we discussed about bank charges being deducted by banks without our

knowledge or our payments made by banks on our standing orders etc. There can be other reasons as well.

Such errors are called ERRORS OF OMISSION

ERROR OF COMMISSION

Then, there is a chance that the event is classified and recorded correctly but within wrong classification of

account. For example, a payment to Mr. A, who is a debtor, is recorded in the account of Mr. B, who is also

a debtor. Now the classification is correct but entry is posted in the wrong account. Such errors are called

ERRORS OF COMMISSION.

ERROR OF PRINCIPLE

Then there are errors in which an entry is recorded in the wrong class of account. For example a purchase of

fixed asset, say, a vehicle is recorded in an expense account. These errors are called ERRORS OF

PRINCIPLE.

ERROR OF ORIGINAL ENTRY

The errors in which recording is in correct account but the figure is incorrect are called ERRORS OF

ORIGINAL ENTRY. For example, a receipt of Rs. 50,000 from a debtor is recorded as Rs. 5,000 in his

account

Then, there are errors in which the entry is reversed by mistake. This means that the account that should

have been debited is credited and vice versa. These errors are called REVERSAL OF ENTRY.

RECTIFYING THE ERRORS

Now, we will rectify all these types of entries:

ERROR OF OMISSION

This is the easiest error to rectify. You have to record the entry that was omitted by mistake. It is important

to note here that the rectifying entry will be posted on the date on which the error was discovered.

[+ M.Tariq Malik]

Serial #	Description/Particulars	V/No       L/F	Debit      Rs.	Credit      Rs.
	Suspense Account		2,000
	Purchase Account			1,000
	Sales Account			1,000
	Purchase Account		2,000
	Sales Account		2,000
	Suspense Account			4,000
	Installation of Plants & Machinary		5,000
	Wages Account			5,000
	Sales Account		10,000
	Furniture Account			10,000
	Purchase Account		2,000
	Return Outward			2,000
	Return Outward		3,000
	Sales Account			3,000

Rectification Entries:

1)            Suspense Account                          2,000

                                   Purchase A/C                                        1,000

                                   Sales A/C                                               1,000

 

2)             Purchase Account                          2,000    

       Sales Account                                 2,000

                                   Suspense Account                                4,000

 

3)             Installation of Plant                       5,000

       & Machinary A.C

                                   Wages A/C                                              5,000

 

4)             Sales A/C                                          10,000

                                    Furniture A/C                                         10,000

 

5)             Purchase A/C                                   2,000

                                    Return Outward A/C                             2,000

 

6)             Return inward                                 3,000

                                    Sales A/C                                                 3,000

[+ M.Tariq Malik]

See the attached file pls

[+ M.Tariq Malik]

Rectification Entries:

1)            Suspense Account                          2,000

                                   Purchase A/C                                        1,000

                                   Sales A/C                                               1,000

 

2)             Purchase Account                          2,000    

       Sales Account                                 2,000

                                   Suspense Account                                4,000

 

3)             Installation of Plant                       5,000

       & Machinary A.C

                                   Wages A/C                                              5,000

 

4)             Sales A/C                                          10,000

                                    Furniture A/C                                         10,000

 

5)             Purchase A/C                                   2,000

                                    Return Outward A/C                             2,000

 

6)             Return inward                                 3,000

                                    Sales A/C                                                 3,000

[+_ M@L!K_MIT Completed]

Solution for All......... 

Sale of goods worth Rs. 10,000 on credit basis to Mr. A was wrongly passed through the purchase book.

Original entry: Mr. A   10,000                    Wrong Entry: Purchase A/C  10,000

                           Sales A/C  10,000                                     Mr. A         10,000

Rectifying entry:  Mr A    20,000

                                           Purchase A/C 10,000

                                           Sales A/C      10,000