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Topic to be tested:

  • Rectification of errors

Learning Objectives:

  • To understand the type of errors and effects of identified errors on trial balance and financial statements

GDB Question:

Mr. Aslam is running his small business under the name of Aslam and Sons. He has recently hired Mr. Anwar as a junior accountant to maintain the books of accounts of his business. Mr. Anwar has little knowledge in accounting. Recently, it has been observed that Mr. Anwar made the following errors in the books of accounts.

 

Cases

Type of error

Case –A: Goods of Rs. 100,000 bought on credit from Mr. Ali but recorded as Rs. 10,000.

?

Case –B: Cash withdrawals from business wrongly debited to the cash account and credited to the drawings account.

?

 

Required:

  1. Identify the “type of error” committed by Mr. Anwar under Case-A given above.
  2. Identify the “type of error” committed by Mr. Anwar under Case-B given above.
  3. What will be the effect of given errors on arithmetical accuracy of trial balance? (Just mention whether the trial balance would be overstated, understated or remains unaffected).
  4. Compute the correct amount of Net profit, if net profit before correcting the above errors was Rs. 150,000.

Note: Be concise and avoid unnecessary detail to attempt the given questions.

Important Instructions:

  1. Your discussion must be based on logical facts.

  2. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
  3. Obnoxious or ignoble answer should be strictly avoided.
  4. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

Views: 5014

Replies to This Discussion

GDB Solution 

1) Error of Original Entry
2) Reversal of entry
3) In case 1 trial balance would be understated and in case II trial balance would be unaffected.
4) Net profit before correct the error is 100,000 and after correct the error 10,000 charged to goods so net profit will be 100,000-10,000=90,000

I guess Trial Balance would not be affected,

Question is

What will be the effect of given errors on arithmetical accuracy of trial balance? 

Trial balance only affects when one side Credit Or Debit is not balanced

here is the reference 

http://www.double-entry-bookkeeping.com/bookkeeping-basics/accounti...

GDB Solution.

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