CERTIFICATE LEVEL

Subject Fundamentals of Financial Accounting (BA3)

Mallik De Silva
Lecturer FCMA, MSc, ACA, LTCL, Dip. IFRS (ACCA)

Module BA3 M Kit Chapter 15

Code BA3/MS/30
Chapter 15

Correction of Errors

Identification of Errors.

Question 148

A payment for electricity was debited to salaries and wages account.

a) What’s the type of error

b) If it was debited to office equipment account what’s the type of error?

Question 149

A purchase of a motor car was debited to Furniture account

What’s the type of error?

Question 150

What is the type of error which would not affect the view given by financial statements?

Question 151

If a non current asset was debited to purchases. The error would be called

Question 152

A Credit purchase for $700 was recorded as $1,700 into the correct ledger accounts

What’s the type of error?

Question 153

The purchase of furniture was debited to repairs and maintenance account and credited to
cash account.

What is the type of error?

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Question 154

For each of the errors notes below, match it with the type of error from the available list

Error Type of error

A A transaction has not been recorded

B One side of a transaction has been recorded in the

wrong account, and that account is of a different
class from the correct account

C One side of a transaction has been recorded in the

wrong account, and the account is of the same class
as the correct account
D A transaction has been recorded using the wrong
amount

Type of error:

Error of original entry / Error of commission / Error of omission / Error of principle

Correction of Errors which do not affect the Trial Balance

Question 155

$500 collected from Frank was credited to Fred.

What’s the correcting entry?

Question 156

A credit purchase from Jane for $300 was recorded in the purchase day book as $240. How
should this be corrected?

Suspense Accounts and Correction of Errors

Question 157

A payment to Steven of $100 was posted as $80. (from the cash book)

What’s the correcting entry?

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Question 158

Rent of $6,000 was not posed from the cash book.

What’s the correcting entry?

Question 159

The trial balance of Error plc contained the following Errors

1. A payment of $100 from Roger was posted as $120

2. Rent of $ 5,000 was not posted from the cash book
3. $400 paid to Jacob was debited to John’s account
4. A Collection of $200 from Peter was posted as $20

You are required to state the journal entries to correct the above errors

Question 160

Following preparation of a trial balance, it was found not to agree, and a suspense account
was opened with a credit balance of $130.

Which two of the following statements would each explain this difference?

A Omission of a sale of $130 from the sales account

B Recording a purchase of $130 twice in the purchases account
C Failure to write off an irrecoverable debt of $130
D Recording an electricity bill paid of $65 by debiting the bank account and crediting the
electricity account
E Omission of the insurance expense ledger account balance of $130 from the trial balance

Impact on Profits

Question 161

An invoice for Rent has been debited to the Land Lord’s account and credited to Rent
expense account. What’s the impact of this error on

a) Profits?
b) Current Liabilities?

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Question 162

An invoice for Rent was correctly accounted but duplicated. What’s the impact on

a) Profit
b) Current Liabilities.

Question 163

A purchase of Plant and machinery was debited to purchases account. What’s the impact
on

a) Profits
b) Noncurrent assets

Question 164
May 2003 Q:1.1

After the profit and loss account for Z Ltd had been prepared, it was found that accrued
expenses of $1,500 had been omitted and that closing stock had been
overvalued by $500.

The effect of these errors is an

A overstatement of net profit of $1,000

B overstatement of net profit of $2,000
C understatement of net profit of $1,000
D understatement of net profit of $2,000

Question 165
May 2003 Q:1.7

E Ltd received an invoice for the purchase of fixed asset equipment which was credited to
the correct supplier’s ledger account, but debited to the equipment repairs account,
instead of the equipment account.

The effect of not correcting this error on the financial statements would be:

A Profit would be overstated and fixed assets would be understated.

B Profit would be overstated and fixed assets would be overstated.
C Profit would be understated and capital would be overstated.
D Profit would be understated and fixed assets would be understated

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Question 166

After calculating your profit for 2019, you discover the following errors.

• A purchase of inventory which had cost $15,000 had been included in the non-current
asset account.
• An electricity bill for $10,000 had been included as rental income rather than as
electricity expense.
Drag and drop words and values from the available list to complete the following
statement. Not all words have to be used and words can be used more than once.
These two errors had the effect of __________ gross profit by $ ______ and _______ net
profit by ___________ .

Available words: overstating/understating/$10,000/$15,000/$25,000/$35,000

Trial Balance Related Errors

Question 167

Affects Does not

Financial Reporting Error Trial affect Trial
Balance Balance
1. Purchase of a Motor Car debited to Furniture
2. Omission of a Sales invoice
3. A payment made for rent not posted from the cash
book
4. A payment made to a supplier was recorded twice
5. A collection from a customer had only been
recorded in the cash book.

Question 168

What’s the main purpose of preparing a Trial Balance prior to the preparation of final
accounts?

Question 169

A company has a petty cash float of $800. A payment for $600 was recorded in petty cash
book but entered as $580 in analysis column which was posted to the nominal ledger.

What’s the impact of the error on the Trial Balance.

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Question 170
May 2002 Q:1.21

Which of the following errors will cause the trial balance totals to be unequal?

A Errors of transposition.
B Errors of omission.
C Errors of principle.
D All of the above.

Question 171
November 2002 Q:1.7

In a manual accounting system, the most important reason for extracting a trial balance
prior to preparing financial statements is that

A it proves the arithmetical accuracy of the ledgers.

B it provides a summary of the financial statements.
C it proves the individual ledger accounts are correct.
D it reveals how errors have been made.

Additional Questions

Question 172

IJ plc’s suspense account contained a credit balance of $740. This could be due to

A. A rent invoice of $1,000 which was debited to the rent account as $ 1,740
B. The duplication of a rent invoice of $740
C. A rent invoice for $740 was debited to the Land Lord’s account and credited to the rent account
D. A rent invoice for $1,740 was debited to the rent account as $1,000

Question 173
November 2001 Q: 1.10

A Ltd’s trial balance does not balance. Which ONE of the following errors may be the
cause of this failure to balance?

A The purchase of a machine had been debited to the machine repairs account.
B A cheque from a customer had been credited to the purchase ledger account of the customer.
C Goods returned inwards had been debited to the sales ledger account of the customer.
D The depreciation charge on machinery had been credited to the cost of machinery account.

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Question 174

The debit side of OPQ's trial balance totals $1,200 more than the credit side.

Which of the following errors would fully account for the difference?

A The petty cash balance of $1,200 has been omitted from the TB
B A receipt of $1,200 for commission receivable has been omitted from the records
C $600 paid for plant maintenance has been correctly entered into the cash book and credited to the
plant cost account
D Discount received of $600 has been debited to the discount allowed account

Question 175

Bond's trial balance failed to agree and a suspense account was opened for the difference.
The following errors were found in Bond's accounting records:

1) In recording the sale of a non-current asset, cash received of $33,000 was credited to
the disposals account as $30,000.
2) An opening accrual of $340 had been omitted.
3) Cash of $8,900 paid for plant repairs was correctly accounted for in the cash book but was
credited to the plant cost account.
4) A cheque for $12,000 paid for the purchase of a machine was debited to the machinery
account as $21,000.
Which of the errors will require an entry to the suspense account to correct them?

A. 1,3 and 4 only

B. All
C. 1 and 4 only
D. 2 and 3 only

Question 176

When a transaction is credited to the correct ledger account, but incorrectly debited to the
repairs and renewals account instead of to the plant and machinery account, what type of
error is this?

A An error of omission
B An error of commission
C An error of principle
D An error of original entry

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Question 177

If a purchase return of $48 has been wrongly posted to the debit side of the sales returns
account, but has been correctly entered in the supplier's account, what would the total of the trial
balance show?

A The credit side to be $48 more than the debit side

B The debit side to be $48 more than the credit side
C The credit side to be $96 more than the debit side
D The debit side to be $96 more than the credit side

Question 178

The debit side of a trial balance totals $50 more than the credit side. What could cause this
difference in the trial balance?

A A purchase of goods for $50 being omitted from the payables account
B A sale of goods for $50 being omitted from the receivables account
C An invoice of $25 for electricity being credited to the electricity account
D A receipt for $50 from a receivable being omitted from the cash book

Question 179

An invoice from a supplier of office stationery has been debited to the rent account. What type
of error is this?

A An error of commission
B An error of original entry
C A compensating error
D An error of principle

Question 180

Which one of the following is an error of principle?

A A gas bill credited to the gas account and debited to the bank account
B The purchase of a non-current asset credited to the asset at cost account and debited to the
payables account
C The purchase of a non-current asset debited to the purchases account and credited to the payables
account
D The payment of wages debited and credited to the correct accounts, but using the wrong amount

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 Question 181

What would be the result of recording the purchase of computer stationery by debiting the
computer equipment at cost account?

A An overstatement of profit and an overstatement of non-current assets

B An understatement of profit and an overstatement of non-current assets
C An overstatement of profit and an understatement of non-current assets
D An understatement of profit and an understatement of non-current assets

Question 182

Which one of the following statements best explains the purpose of the trial balance?

A The purpose of the trial balance is to check the arithmetical accuracy of the entries made to the
ledger accounts
B The purpose of the trial balance is to help prepare the statement of profit or loss
C The purpose of the trial balance is to help prepare the statement of financial position
D The purpose of the trial balance is to prove that the accounting ledgers contain no errors

♪ Quick Exam Techniques

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