Real Life Application

Accounting errors refer to mistakes in financial records. What are the methods of locating accounting errors?

• Trial balance method

• Bank reconciliation

• Ledger scrutiny

• All of the above

An error of principle is:

• a mistake in applying accounting principles

• a clerical error

• an error in data entry

• a computational error

A compensatory error is:

• an error that is corrected by another error

• an error that cannot be corrected

• an error that is ignored

• an error that is repeated

What type of error affects the trial balance agreement?

• Two Sided Errors

• One Sided Errors

Example: Purchase of goods from Arshad & Co Rs. 4000 was omitted to be recorded in the books. What is the rectify entry for this transaction?

• Debit Purchases Account Rs. 4000; Credit Arshad & Co Rs. 4000

• Debit Arshad & Co Rs. 4000; Credit Purchases Account Rs. 4000

• Debit Cash Account Rs. 4000; Credit Arshad & Co Rs. 4000

• Debit Arshad & Co Rs. 4000; Credit Cash Account Rs. 4000

An Error of Original Entry in accounting is:

• a mistake made when a transaction is first recorded in the books.

• an error that occurs when transferring amounts from the journal to the ledger.

• a discrepancy found during the bank reconciliation process.

• a mistake in the calculation of financial ratios.

Based on the example provided, what is the correct entry for goods sold to Mr. Naeem for Rs. 5000?

• Mr. Naeem 500, Sales 500

• Mr. Naeem 5000, Sales 5000

• Mr. Naeem 4500, Sales 4500

What type of expenditure is associated with short term benefits and routine expenses?

• Revenue Expenditure

• Capital Expenditure

What are Compensating Errors?

• Errors that occur on the same side of accounts and do not cancel each other.

• Errors that occur on the opposite side of two or more accounts and have cancelled themselves in the net result.

• Errors that occur due to incorrect data entry.

• Errors that occur due to system malfunction.

Based on the example provided, what is the rectifying entry for the following errors: Purchase A/c has been wrongly debited with Rs.5000 instead of Rs.4000. Asif A/c has been wrongly credited with Rs.1500 instead of Rs.1000 and Sales A/c has been wrongly credited with Rs.6000 instead of Rs.5500. Use the table to determine the correct rectifying entry.

• Debit Purchase A/c Rs.1000, Credit Asif A/c Rs.500, Credit Sales A/c Rs.500

• Debit Purchase A/c Rs.1000, Debit Asif A/c Rs.500, Debit Sales A/c Rs.500

• Credit Purchase A/c Rs.1000, Debit Asif A/c Rs.500, Credit Sales A/c Rs.500

• Credit Purchase A/c Rs.1000, Credit Asif A/c Rs.500, Debit Sales A/c Rs.500