Prasanna

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Accountancy Guide Pdf Chapter 14 Computerised Accounting Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Accountancy Solutions Chapter 14 Computerised Accounting

11th Accountancy Guide Computerised Accounting Text Book Back Questions and Answers

I. Multiple Choice Questions

Choose the correct answer.

Question 1.
n accounting, computer is commonly used in the following areas:
a) Recording of business transactions
b) Payroll accounting
c) Stores accounting
d) All the above
Answer:
d) All the above

Question 2.
Customised accounting software is suitable for ________.
a) Small, conventional business
b) Large, medium business
c) Large, typical business
d) None of the above
Answer:
b) Large, medium business

Question 3.
Which one is not a component of computer system?
a) Input unit
b) Output unit
c) Data
d) Central Processing Unit
Answer:
c) Data

Question 4.
An example of output device is ________.
a) Mouse
b) Printer
c) Scanner
d) Keyboard
Answer:
b) Printer

Question 5.
One of the limitations of computerised accounting system is ________.
a) System failure
b) Accuracy
c) Versatility
d) Storage
Answer:
a) System failure

Question 6.
Expand CAS ________.
a) Common Application Software
b) Computerised Accounting System
c) Centralised Accounting System
d) Certified Accounting System
Answer:
b) Computerised Accounting System

Question 7.
Which one of the following is not a method of codification of accounts?
a) Access codes
b) Sequential codes
c) Block codes
d) Mnemonic code
Answer:
a) Access codes

Question 8.
TALLY is an example of ________.
a) Tailor-made accounting software
b) Ready-made accounting software
c) In-built accounting software
d) Customised accounting software
Answer:
b) Ready-made accounting software

Question 9.
People who write codes and programmes are called as ________.
a) System analysts
b) System designers
c) System operators
d) System programmers
Answer:
d) System programmers

Question 10.
Accounting software is an example of ________.
a) System software
b) Application software
c) Utility software
d) Operating software
Answer:
b) Application software

II. Very Short Answer Questions

Question 1.
What is a computer?
Answer:

1. A computer can be described as an electronic device designed to accept raw data as input, processes them and produces meaningful information as output.
2. It has the ability to perform arithmetic and logical operations as per given set of instructions called program.

Question 2.
What is CAS?
Answer:

1. Computerised accounting system refers to the system of maintaining accounts using computers.
2. It involves the processing of accounting transactions through the use of hardware and software in order to keep and produce accounting records and reports.
3. Computerised accounting system takes accounting transactions as inputs that are processed through accounting software.

Question 3.
What is hardware?
Answer:

1. The physical components of a computer constitute its hardware.
2. Hardware consists of input devices and output devices that make a complete computer system.
3. Examples of input devices are keyboard, optical scanner, mouse, joystick, touch screen and stylus which are used to feed data into the computer.
4. Output devices such as monitor and printer are media to get the output from the computer.

Question 4.
What is meant by software?
Answer:
A set of programs that form an interface between the hardware and the user of a computer system are referred to as software.

Question 5.
What is accounting software?
Answer:
Accounting software describes a type of application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, journal, general ledger, payroll, and trial balance. It functions as an accounting information system

Question 6.
Name any two accounting packages.
Answer:

1. Readymade software
2. Customised software
3. Tailormade software

Question 7.
Give any two examples of readymade software.
Answer:

1. Tally ERP
2. Profit Books

Question 8.
What is coding?
Answer:

1. Coding refers to creating computer programming code.
2. The process of assigning something for classification or identification is known as coding.

Question 9.
What is grouping of accounts?
Answer:

1. Each minor head in accounting have number of sub-heads.
2. After classification of accounts into various groups namely, major, minor and sub-heads and allotting codes to each account these are programmed into the computer system.
3. A proper codification requires a systematic grouping of accounts.
4. The major groups or heads could be Assets, Liabilities, Revenues and Expenses.
5. The sub-groups or minor heads could be capital, non-current liabilities, current assets, sales and so on.

Question 10.
What are mnemonic codes?
Answer:

1. A mnemonic is a term, symbol or name used to define or specify a computing function.
2. Assembly language also uses a mnemonic to represent machine operation, or opcode.
3. Example are SJ – Sales Journals ; HQ – Head Quarters.

III. Short Answer Questions

Question 1.
What are the various types of accounting software?
Answer:
1. Readymade software:

• These packages are standardised or readymade packages which can be used by the business enterprises immediately on procurement. These packages are used by small and conventional business enterprises.
• Cost of installation and maintenance is very low. Training cost is negligible and sometimes the vendor provides free of cost training.
• This software’s are used by those enterprises where financial transactions are simple, uniform and routine in nature. Few examples of such type of software are Tally, Busy, Marg, and Profit books.

2. Customised software:

• Many a time, it is not possible that ready-to-use packages suit the requirements of the business enterprise.
• In such circumstances, customised packages may help the business enterprise for fulfilling their requirements. Customised packages can be modified according to the need of the enterprise.
• For example, software can record attendance of the employees and on the requirement of the customer it can also count the absence of employees in a month, etc.

3. Tailor made software:

• Large enterprises have their own way of functioning.
• For effective management information system, varied and specific information is frequently required by many users which may not be needed in case of small or medium scale enterprises.
• In such enterprises, depending upon their functioning, need based software’s known as tailored packages are installed.
• The cost of these packages is very high and specific training for using these packages is also required.

Question 2.
Mention any three limitations of computerised accounting system.
Answer:
1. Heavy cost of installation – Computer hardware needs replacement and software needs to be updated from time to time with the availability of newer versions.

2. Cost of training – To ensure effective and efficient use of computerised system of accounting, newer versions of hardware and software are to be introduced. These require special training and hence, cost is incurred to train the staff personnel.

3. Fear of unemployment – On account of the introduction of computerised accounting system, the employees feel insecure that they may lose employment and show less interest in computer related work.

4. Disruption of work – When computerised system is introduced, the existing process of accounting and other works are interrupted. This results in certain changes in the working environment.

5. System failure – The danger of a system crashing due to some failure in hardware can lead to subsequent interruption of work. This is more when no back-up is made.

Question 3.
State the various types of coding methods.
Answer:
Following are the three methods of codification.
(a) Sequential codes – In sequential code, numbers and/or letters are assigned in consecutive order. These codes are applied primarily to source documents such as cheques, invoices, etc. A sequential code can facilitate document search.
For example:

• Code – Accounts
• CL001 – ABC LTD
• CL002 – XYZ LTD
• CL003 – SCERT

(b) Block codes – In a block code, a range of numbers is partitioned into a desired number of sub-ranges and each sub- range is allotted to a specific group. In most of the cases of block codes, numbers within a sub – range follow sequential coding scheme, i.e., the numbers increase consecutively.
For example:

• Code       – Dealer type
• 100 – 199 – Small pumps
• 200 – 299 – Medium pumps
• 300 – 399 – Pipes
•  400 – 499 – Motors

(c) Mnemonic codes – A mnemonic code consists of alphabets or abbreviations as symbols to codify a piece of information.
For example:

• Code – Information
• SJ – Sales Journals
• HQ – Head Quarters

Question 4.
List out the various reports generated by computerised accounting system.
Answer:
Computerised accounting system takes accounting transactions as inputs that are processed through accounting software to generate the following reports:

1. Day books /Journals
2. Trading account
3. Ledger
4. Profit and loss account
5. Trial balance
6. Balance sheet, etc.

Question 5.
Tate the input and output devices of a computer system,
Answer:
1. Input devices – Examples of input devices are keyboard, optical scanner, mouse, joystick, touch screen and stylus which are used to feed data into the computer.

2. Output devices – Examples Output devices such as monitor and printer are media to get the output from the computer.

11th Accountancy Guide Computerised Accounting Additional Important Questions and Answers

I. Choose the correct answer.

Question 1.
An example of input device is ________.
a) Mouse
b) Printer
c) Monitor
d) Headphone
Answer:
a) Mouse

Question 2.
The facts and figures that are fed into a computer for further processing are called ________.
a) Procedure
b) Connectivity
c) Data
d) Reliability
Answer:
c) Data

Question 3.
________ packages are used by small and conventional business enterprises.
a) Readymade software
b) Customised software
c) Tailor made software
d) None of these
Answer:
a) Readymade software

Question 4.
________ packages c n be modified according to the need of the enterprise.
a) Readymade software
b) Customised software
c) Tailor made software
d) None of these
Answer:
b) Customised software

Question 5.
________ packages are used by medium or large nature business enterprises.
a) Readymade software
b) Customised software
c) Tailor made software
d) None of these
Answer:
b) Customised software

Question 6.
________ is a step by step series of instructions to per! rm a specific function and achieve desired output.
a) Procedure
b) Connectivity
c) Data
d) Reliability
Answer:
a) Procedure

Question 7.
The physical components of a computer constitute it ________.
a) Hardware
b) Software
c) Data
d) Procedure
Answer:
a) Hardware

Question 8.
A set of tools and programs to manage the overall working of a computer using a defined set of hardware components is called an ________.
a) Programming software
b) Utility software
c) Application software
d) Operating system
Answer:
d) Operating system

Question 9.
________ are designed specifically for managing the computer device and its resources.
a) Programming software
b) Utility software
c) Application software
d) Operating system
Answer:
b) Utility software

Question 10.
________ is an identification mark.
a) Hardware
b) Software
c) Data
d) Code
Answer:
d) Code

Question 11.
________ codes are applied primarily to source documents such as cheques, invoices, etc.
a) Sequential codes
b) Block codes
c) Mnemonic codes
d) None of these
Answer:
a) Sequential codes

Question 12.
________ code can facilitate document search.
a) Mnemonic codes
b) Block codes
c) Sequential codes
d) None of these
Answer:
c) Sequential codes

Question 13.
________ code, a range of numbers is partitioned into a desired number of sub-ranges and each sub-range is allotted to a specific group.
a) Mnemonic codes
b) Block codes
c) Sequential codes
d) None of these
Answer:
b) Block codes

Question 14.
________ code consists of alphabets or abbreviations as symbols to codify a piece of information.
a) Mnemonic codes
b) Block codes
c) Sequential codes
d) None of these
Answer:
a) Mnemonic codes

Question 15.
________ consists of input devices and output devices that make a complete computer system.
a) Hardware
b) Software
c) Data
d) Code
Answer:
a) Hardware

Question 16.
How many formats are available white exporting a file?
a) 2
b) 3
c) 5
d) 7
Answer:
b) 3

Question 17.
Tally package was developed by ________.
a) Tally solutions
b) Microsoft
c) Apple Solutions
d) None of the above
Answer:
a) Tally solutions

Question 18.
Which device of computer operation dispenses with the use of the keyboard?
a) Joystick
b) Mouse
c) Light Pen
d) Touch pen
Answer:
b) Mouse

Question 19.
Which of the following device primarily used to provide hard copy?
a) CRT
b) Pen drive
c) Printer
d) Card Reader
Answer:
c) Printer

Question 20.
Which of the following produces high-quality output?
a) Impact Printer
b) Non-Impact Printer
c) Both (a) and (b)
d) one of the above
Answer:
b) Non-Impact Printer

Question 21.
Which of the following is not a hardware?
a) Printer
b) Scanner
c) Interpreter
d) All of the above
Answer:
c) Interpreter

Question 22.
The copimonly used input device is the ________.
a) Mouse
b) Monitor
c) Keyboard
d) None of the above
Answer:
c) Keyboard

Question 23.
The shortcut to use calculator is ________.
a) Ctrl + M
b) Ctrl + N
c) Ctrl + O
d) Ctrl + C
Answer:
b) Ctrl + N

Question 24.
Suspense account is grouped under ________.
a) Assets
b) Liabilities
c) Income
d) Expenses
Answer:
b) Liabilities

Question 25.
________ is a step by step series of instructions to perform a specific function and achieve desired output.
a) Procedure
b) Data
c) Connectivity
d) All the above
Answer:
a) Procedure

II. Short Answer Questions

Question 1.
What is Operating system?
Answer:
A set of tools and programs to manage the overall working of a computer using a defined set of hardware components is called an operating system. It is the interface between the user and the computer system.
Example: DOS, Windows, UBUNTU, Imac, etc.

Question 2.
What is Programming software?
Answer:
Special software to accept data and interpret them in the form of machine/assembly language under-standable by a computer.
Example: C, PASCAL, COBOL, etc.

Question 3.
What is Utility software?
Answer:
These are designed specifically for managing the computer device and its resources.
Example: File manager, Anti-virus software, etc.

Question 4.
Give any two examples of Application software?
Answer:

1. General purpose software.
2. Specific purpose software.

Question 5.
Give any two examples of System software?
Answer:

1. Operating system.
2. Programming software.
3. Utility software.

Question 6.
What is data?
Answer:
The facts and figures that are fed into a computer for further processing are called data. Data are raw input until the computer system interprets them using machine language, stores them in memory, classifies them for processing and produces results in conformance with the instructions given to it. Processed and useful data are called information which is used for decision making.

Question 7.
What are sequential codes? ‘
Answer:
In sequential code, numbers and/or letters are assigned in consecutive order. These codes are applied primarily to source documents such as cheques, invoices, etc. A sequential code can facilitate document search.
For example:

Question 8.
What are sequential codes?
Answer:
In a block code, a range of numbers is partitioned into a desired number of sub-ranges and each sub-range is allotted to a specific group. In most of the cases of block codes, numbers within a sub-range follow sequential coding scheme, i.e., the numbers increase consecutively.
For example:

Question 9.
What is General purpose software?
Answer:
This type of application can be used for a variety of tasks and not limited to one particular function.
Example: MS-Office.

Question 10.
What is Specific purpose software?
Answer:
This software is created to execute one specific task and they are customised to the needs of user.
Example:
Accounting software, payroll software, etc.

Question 11.
Explain the basic Features of computerised accounting system.
Answer:
i) Simple and integrated – CAS is designed to automate and integrate ail the business operations such as purchase, sales, finance, inventory and manufacturing. The CAS may be integrated with enhanced Management Information System (MIS), multi-lingual and data organisation capabilities to simplify all the business processes of the organisation easily and cost-effectively.

ii) Speed – It can perform functions at much higher speed than doing the same manually.

iii) Accuracy – Computers perform functions with high degree of accuracy. If hardware, software and input by people are proper, the computerised accounting system can assure of accurate outcome.

iv) Reliability – Computers are used to process large volumes of data and hence, data provided by it are reliable.

v) Versatility – Computer and accounting software have the ability to perform diverse tasks. For example, by simply recording accounting entries through accounting software, one can get trial balance, trading account, profit and loss account, balance sheet and diverse reports.

vi) Transparency – With computerised accounting, the organisation will have greater transparency of day-to-day business operations and access to the vital information.

vii) Scalability – CAS enables processing of any volume of data in tune with the change in the size of the business.

viii) On-line facility – CAS offers online facility to store and process transaction and data so as to retrieve information to generate and view financial reports in any part of the world.

Question 12.
Discuss the Advantages of Computerised Accounting System.
Answer:
i) Faster processing – Computers require far less time than human beings in performing a particular task. Therefore, accounting data are processed faster using a computerised accounting system.

ii) Accurate information – There is less space for error because only one account entry is needed for each transaction unlike repeated posting of the same accounting data in manual system.

iii) Reliability – Computer systems are immune to boredom, tiredness or fatigue. Therefore, these can perform repetitive functions effectively and are highly reliable.

iv) Easy availability of information – The data are easily available and can be communicated to different users at the same time.

v) Up-to-date information – Account balances will always be up to date since the records are automatically updated as and when accounting data are entered or stored.

vi) Efficiency – The computer based accounting system ensures better use of time and resources.

vii) Storage and retrieval – Computer based systems require a fractional amount of physical space as compared to the books of accounts in the form of journals, ledgers and accounting registers.

viii) Works as a motivator to employees – Employees using computer systems feel more valued as they are trained and specialised for the job.

Question 13.
Explain the Components of Computerised Accounting System.
Answer:
i) Hardware – The physical components of a computer constitute its hardware. Hardware consists of input devices and output devices that make a complete computer system. Examples of input devices are keyboard, optical scanner, mouse, joystick, touch screen and stylus which are used to feed data into the computer. Output devices such as monitor and printer are media to get the output from the computer.

ii) Software – A set of programs that form an interface between the hardware and the user of a computer system are referred to as software.

iii) People – The most important element of a computer system is its users. They are also called live-ware of the computer system.

iv) Procedure – Procedure is a step by step series of instructions to perform a specific function and achieve desired output.

v) Data – The facts and figures that are fed into a computer for further processing are called data. Data are raw input until the computer system interprets them using machine language, stores them in memory, classifies them for processing and produces results in conformance with the instructions given to it. Processed and useful data are called information which is used for decision making.

vi) Connectivity – When two or more computers are connected to each other, they can share information and resources such as sharing of files (data/music, etc), sharing of printer, sharing of facilities like the internet. This sharing is possible using wires, cables, satellite, infra-red, Bluetooth, microwave transmission, etc.

Question 14.
Differences between manual and computerised accounting system.
Answer:

Question 15.
Compare ready to use software, customised software and tailor made software.
Answer:

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Accountancy Guide Pdf Chapter 12 Final Accounts of Sole Proprietors – I Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Accountancy Solutions Chapter 12 Final Accounts of Sole Proprietors – I

11th Accountancy Guide Final Accounts of Sole Proprietors – I Text Book Back Questions and Answers

I. Multiple Choice Questions

Choose the correct answer.

Question 1.
Closing Stock is an item of ________.
a) Fixed Asset
b) Current asset
c) Fictitious Asset
d) Intangible asset
Answer:
b) Current asset

Question 2.
Balance sheet is ________.
a) An account
b) A statement
c) Neither a statement nor an account
d) None of the above
Answer:
b) A statement

Question 3.
Net profit of the business increases the ________.
a) Drawings
b) Receivables
c) Debts
d) Capital
Answer:
d) Capital

Question 4.
Carriage inwards will be shown ________ .
a) In the trading account
b) In the profit and loss account
c) On the liabilities side
d) On the assets side
Answer:
a) In the trading account

Question 5.
Bank overdraft should be shown ________.
a) In the trading account
b) Profit and loss account
c) On the liabilities side
d) On the assets side
Answer:
c) On the liabilities side

Question 6.
Balance sheet shows of the business ________.
a) Profitability
b) Financial position
c) Sales
d) Purchases
Answer:
b) Financial position

Question 7.
Drawings appearing in the trial balance is ________.
a) Added to the purchases
b) Subtracted from the purchases
c) Added to the capital
d) Subtracted from the capital
Answer:
d) Subtracted from the capital

Question 8.
Salaries appearing in the trial balance is shown on the ________.
a) Debit side of trading account
b) Debit side of profit and loss account
c) Liabilities side of the balance sheet
d) Assets side of the balance sheet
Answer:
b) Debit side of profit and loss account

Question 9.
Current assets does not include ________.
a) Cash
b) Stock
c) Furniture
d) Prepaid expenses
Answer:
c) Furniture

Question 10.
Goodwill is classified as ________.
a) A current asset
b) A liquid asset
c) A tangible asset
d) An intangible asset
Answer:
d) An intangible asset

II. Very Short Answer Type Questions

Question 1.
Write a note on trading account.
Answer:

1. Trading refers to buying and selling of goods with the intention of making profit.
2. Trading account is a nominal account which shows the result of buying and selling of goods for an accounting period.
3. It is prepared to find out the difference between the revenue from sales and cost of goods sold.

Question 2.
What are wasting assets?
Answer:

1. When the asset is used regularly, it depreciates, eventually having little or no residual value.
2. During the period of depreciation, the asset is called a “wasting asset”.
3. Example, natural resources, such as gas and timber, are wasting assets that eventually are used and then have no remaining value.

Question 3.
What are fixed assets?
Answer:

1. Fixed assets are those assets which are acquired or constructed for continued use in the business and last for many years such as land and building, plant and machinery, motor vehicles, furniture etc.
2. It is classified into a. Tangible Assets and b. Intangible Assets.

Question 4.
What is meant by purchases returns?
Answer:

1. Purchases returns or returns outwards, are a normal part of business.
2. Goods may be returned to supplier if they carry defects or if they are not according to the specifications of the buyer.

Question 5.
Name any two direct expenses and indirect expenses. .
Answer:

1. Direct Expenses: Carriage inwards, Wages, Import Duty, and Royalty
2. Indirect Expenses: Office Expenses, Selling Expenses, Administrative Expenses

Question 6.
Mention any two differences between trial balance and balance sheet.
Answer:

Question 7.
What are the objectives of preparing trading account?
Answer:

1. Trading account provideds information about gross profit and gross loss.
2. It provides an opportunity to safeguard against possible losses.
3. It provides information about direct expenses and direct incomes.

Question 8.
What is the need for preparing profit and loss account?
Answer:

1. Ascertainment of net profit and net loss
2. To compare the profits
3. To have a control on expenses
4. It is used to prepare the balance sheet

III. Short Answer Questions

Question 1.
What are final accounts? What are its constituents?
Answer:

1. The business entities are interested in knowing periodically the results of business operations carried on and the financial soundness of the business.
2. In other words, they want to know the profitability and the financial position of the business.
3. These can be ascertained by preparing the final accounts or financial statements.
4. The final accounts are usually prepared at the end of the accounting period on the basis of balances of ledger accounts shown by the trial balance.

The final accounts or financial statements include the following:

1. Income Statement or Trading and Profit and Loss Account and
2. Position Statement or Balance Sheet.

The purposes of preparing the financial statements are:

1. To ascertain the financial performance of an enterprise and
2. To ascertain the financial position of an enterprise.
3. The income statement and balance sheet are prepared for these purposes respectively.
4. Income statement gives the manner in which the profit or loss for an accounting period is arrived at.
5. Hence, at the close of the accounting period, all nominal accounts (i.e. expenses, losses, revenues, gains, purchases, purchases returns, sales and sales returns) are to be closed by transferring to the income statement or trading and profit and loss account.

Question 2.
What is meant by closing entries? Why are they passed?
Answer:
1. Balances of all the nominal accounts are required to be closed on the last day of the accounting year to facilitate the preparation of trading and profit and loss account.

2. It is done by passing necessary closing entries in the journal proper.

3. Purchases have debit balance and a purchases return has credit balance.

4. At the end of the accounting year, the balance in purchases returns account is closed by transferring to purchases account.

5. Similarly, sales account has credit balance and sales returns have debit balance.

6. At the end of the accounting year, the balance in sales returns account is closed by transferring to sales account.

7. The various closing entries are as follows
(e.g.) for closing purchases returns account

Question 3.
What is meant by gross profit and net profit?
Answer:
Gross profit:

1. The difference between the totals of two sides of the trading account indicates either gross profit or gross loss.
2. If the total of the credit side is more, the difference represents gross profit.
3. On the other hand, if the total of the debit side is higher, the difference represents gross loss.
4. The gross profit or gross loss is transferred to profit and loss account.

Net profit:

1. After debiting indirect expenses and losses and crediting all indirect incomes and gains, if the total of the credit side of the profit and loss account exceeds the debit side, the difference is termed as net.
2. profit.
3. On the other hand, if the total in the debit side exceeds the credit side, the difference is termed as net loss. Net profit or net loss is transferred to the capital account.

Question 4.
“Balance sheet is not an account”- Explain.
Answer:
1. A balance sheet is a part of the final accounts. However, the balance sheet is a statement and not an account. It has no debit or credit sides and as such the words ‘To’ and ‘By’ are not used before the names of the accounts shown therein.

2. A balance sheet is a summary of the personal and real accounts, which have balances. Personal and real accounts having debit balances are shown on the right hand side known as assets side, whereas personal and real accounts having credit balances are shown on the left hand side known as liabilities side.

3. The totals of the two sides of the balance sheet must be equal. If the totals are not equal, it indicates existence of error. It must satisfy the accounting equation, i.e., Assets = Capital + Liabilities, following the dual aspect concept.

4. Balance sheet is prepared on a particular date and not for a fixed period. It discloses the financial position of a business on a particular date. It gives the balances only for the date on which it is prepared.

5. It shows the financial position of the business according to the going concern concept.

Question 5.
What are the advantages of preparing a balance sheet?
Answer:
1. The main purpose of preparing a balance sheet is to ascertain the true financial position of the business at a particular point of time.

2. It helps in comparing the cost of various assets of the business such as the amount of closing stock, amount due from debtors, amount of fictitious assets, etc.

Moreover as assets and liabilities of similar nature are grouped and presented in balance sheet, a comparative study of these assets and liabilities is facilitated. It helps in comparing the various liabilities of the business.

3. It helps in finding out the solvency position of the firm. The firm’s solvency position is favourable if the assets exceed the external liabilities. The firm’s solvency position is not favourable it the external liabilities exceed the assets.

Question 6.
What is meant by grouping and Marshalling of assets and liabilities?
Answer:

1. The assets and liabilities shown in the balance sheet are grouped and presented in a particular order.
2. The term ‘grouping’ means showing the items of similar nature under a common heading.
3. For example, the amount due from various customers will be shown under the head ‘Sundry debtors/ Similarly, under the head ‘Current assets’, the balance of cash, bank, debtors, stock and other current assets will be shown.
4. ‘Marshalling’ is the arrangement of various assets and liabilities in a proper order.
5. Marshalling can be made in one of the following two ways:

a) In the order of liquidity:

• According to this method, an asset which is most easily convertible into cash, i.e., cash in hand is shown first and then will follow those assets which are comparatively less easily convertible, So that the least liquid asset i.e., goodwill is shown last.
• In the same way, the liabilities which are to be paid at the earliest will be shown first. In other words, current liabilities are shown first, then fixed or long-term liabilities and finally the proprietor’s capital.

b) In the order of permanence:

• This method is exactly the reverse of the first method.
• Asset which is more permanent, i.e., goodwill is shown first followed by assets which are less permanent. Similarly, those liabilities which are to be paid last will be shown first.
• In other words, the proprietor’s capital is shown first, then fixed or long-term liabilities and lastly the current liabilities. Joint stock companies are required under the Companies Act to prepare their balance sheet in the order of permanence.

IV. Exercises

Question 1.
Prepare trading account in the books of Sivashankar from the following figures

Solution:
Trading account

Question 2.
Prepare trading account in the books of Mr. Sanjay for the year ended 31^st December 2017

Solution:
Trading account as on 31^st Dec 2017

Question 3.
From the following balances taken from the books of Saravanan, calculate gross profit for the year ended December 31, 2017

Solution:
Trading account as on 31^st Dec 2017

Question 4.
From the following details for the year ended 31^st March, 2018, prepare trading account.

Solution:
Trading account as on 31^st Mar 2018

Question 5.
Ascertain gross profit or gross loss from the following:

Solution:
Trading account

Question 6.
From the following balances taken from the books of Victor, prepare trading account for the t year ended December 31, 2017:

Solution:
Trading account as on 31^st Dec 2017

Question 7.
Compute cost of goods sold from the following information

Solution:
Compute cost of goods sold from the following information.
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 10,000 + 80,000 + 7,000 -15,000 .
= ₹ 82,000

Question 8.
Find out the amount of sales from the following information:

Solution:
Find out the amount of sales from the following information:
Cost of goods sold = Opening stock + Net purchases – Closing stock
= 30,000 + 2,00,000 – 20,000
= ₹ 2,10,000
Let the sales be = 100
Less: Gross profit (30% on sales i.e,100) = 30
Cost of goods sold = ₹ 70
Therefore percentage of gross profit on cost of goods sold is \(\frac { 30 }{ 70 }\) x 100
= 42.86%
Gross profit = 42.86% on ₹ 2,10,000
i.e = \(\frac { 42.86 }{ 100 }\) x 2,10,000
= 90,000
Sales = Cost of goods sold + Gross profit
= 2,10,000 + 90,000
Sales = ₹ 3,00,000

Question 9.
Prepare profit and loss account in the books of Kirubavathi for the year ended 31^st December, 2016 from the following information:

Solution:
Trading account as on 31^st Dec 2016

Question 10.
Ascertain net profit or net loss from the following:

Solution:
Trading account

Question 11.
From the following details, prepare profit and loss account.

Solution:
Trading account

Question 12.
From the following information, prepare profit and loss account for the year ending 31^st December, 2016.

Solution:
Trading account as on 31^st Dec 2016

Question 13.
From the following balances obtained from the books of Mr. Ganesh, prepare trading and profit and loss account.

Solution:
Trading and Profit & loss account

Question 14.
From the following balances extracted from the books of a trader, ascertain gross profit and net profit for the year ended March 31^st, 2017.

Closing stock on December 31.12.2017 was ₹ 4,500
Solution:
Trading and Profit & loss A/c for the year ended 31^st Mar 2017

Question 15.
From the following particulars, prepare balance sheet in the books of Bragathish as on 31^st December, 2017

Solution:
Balance Sheet as on 31^st Dec 2017

Question 16.
Prepare trading and profit and loss account in the books of Ramasundari for the year ended 31^st December, 2017 and balance sheet as on that date from the following information:

Solution:
Trading and Profit & loss A/c for the year ended 31^st Dec 2017

Balance Sheet as on Ramasundari on 31^st  December 2017

Question 17.
From the Trial balance, given by Saif, prepare final accounts for the year ended 31^st March, 2018 in his books.

Closing stock (31-12-2017) ₹ 14,500
Solution:
Trading and Profit & loss A/c for the year ended 31^st Mar 2018

Balance sheet of saif on 31^st Mar 2018

Question 18.
Prepare trading and profit and loss account and balance sheet in the books of Deri, a trader, from the following balances as on March 31, 2018.

Closing stock (31^st March, 2018) ₹ 8,000
Solution:
Trading and Profit & loss A/c for the year ended 31^st Mar 2018

Balance sheet of Deri as on 31^st March 2018.

11th Accountancy Guide Final Accounts of Sole Proprietors – I Additional Important Questions and Answers

I. Choose the correct answer.

Question 1.
Carriage outwards will be shown ________.
a) In the trading account
b) In the profit and loss account
c) On the liabilities side
d) On the assets side
Answer:
b) In the profit and loss account

Question 2.
Opening stock is ________.
a) Debited in trading account
b) Credited in trading account
c) Credit ¡n profit and loss account
d) Debited in profit and loss account
Answer:
a) Debited in trading account

Question 3.
___________ account enables the trader to find out gross profit or loss.
a) Trading Account
b) Profit and loss Account
c) Balance sheet
d) Trial balance
Answer:
a) Trading Account

Question 4.
__________ account enables the trader to find out Net profit or loss.
a) Trading Account
b) Profit and loss Account
c) Balance sheet
d) Trial balance
Answer:
b) Profit and loss Account

Question 5.
Fixed assets does not include ________.
a) Plant
b) Stock
c) Furniture
d) Computer
Answer:
c) Furniture

Question 6.
Current Liabilities does not include ________.
a) Sundry Creditors
b) Bills Payable
c) Debentures
d) Outstanding Expenses
Answer:
c) Debentures

Question 7.
All incomes are ________ in the profit and loss account.
a) Debited
b) Credited
c) Assets
d) Liabilities
Answer:
b) Credited

Question 8.
Bad debt is a ________ expense.
a) Office expenses
b) Administrative expenses
c) Selling expenses
d) Distribution expenses
Answer:
c) Selling expenses

Question 9.
Wages is an example of ________.
a) Capital expenses
b) Indirect expenses
c) Direct expenses
d) Revenue expenses
Answer:
c) Direct expenses

Question 10.
Fixed assets have ________.
a) Short life
b) long life
c) no life
d) All of these
Answer:
b) long life

Question 11.
________ refers to buying and selhng of goods with the intention of making profit.
a) Trading
b) Trial balance
c) Profit and loss account
d) Balance sheet
Answer:
a) Trading

Question 12.
The goods remaining unsold at the end of the accounting period are known as _________
a) Opening stock
b) Closing stock
c) Average stock
d) None of these
Answer:
b) Closing stock

Question 13.
________ is the arrangement of various assets and liabilities in a proper order.
a) Marshalling
b) Grouping
c) Recording
d) Packing
Answer:
a) Marshalling

Question 14.
Net profit or Net loss ¡s traflsferred to the ________ account.
a) Trading
b) Profit and loss
c) Capital
d) None of these
Answer:
c) Capital

Question 15.
Gross profit or Grosš loss is transferred to the _______ account.
a) Trading
b) Profit and loss
c) Capital
d) None of these
Answer:
b) Profit and loss

II. Very Short Answer Type Questions

Question 1.
Definition of trading accounting?
Answer:
According to J. R. Batliboi, “The trading account shows the results of buying and selling of goods. In preparing this account, the general establishment charges are ignored and only the transactions in goods are included.”

Question 2.
What is opening stock?
Answer:
The stock of goods remaining unsold at the end of the previous year is the opening stock of the current year. This item will not be there in a newly started business. It will not appear if it is adjusted with pur-chases. As opening stock would have been sold during the year, the cost of opening stock is included in trading account.

Question 3.
What do you mean by direct expenses?
Answer:
All the expenses incurred on the purchase of goods and for bringing the goods to the go down or place of business and to make them to saleable condition are known as direct expenses.

Question 4.
What is Carriage inwards or Freight inwards?
Answer:
Amount paid for transporting the goods purchased to the go down or business premises is called carriage inwards or carriage on purchases or freight inwards.

Question 5.
What is Wages?
Answer:
Amount paid to workers who are directly engaged in loading, unloading and handling of goods purchased is known as wages.

Question 6.
What is Dock Charges?
Answer:
These are the charges levied for shipping the cargo while entering or leaving docks. When they are paid on import of goods, they are treated as direct expenses.

Question 7.
What do you mean by direct expenses?
Answer:
The goods remaining unsold at the end of the accounting period are known as closing stock. They are valued at cost price or net realisable value (market price) whichever is lower.

Question 8.
Definition of Profit and Loss?
Answer:
According to Prof. Carter, “A Profit and Loss Account is an account into which all gains and losses are collected, in order to ascertain the excess of gains over the losses or vice-versa”.

Question 9.
Definition of Balance Sheet?
Answer:
According to J.R. Batliboi, “A Balance Sheet is a statement prepared with a view to measure the exact financial position of a business on a certain fixed date.”

Question 10.
State Methods of drafting a balance sheet.
Answer:
The balance sheet of business concern can be presented in the following two forms.

1. Horizontal form
2. Vertical form

Question 11.
Explain the Tangible fixed assets?
Answer:
Tangible fixed assets are those which have physical existence or which can be seen and felt. Examples: plant and machinery, building and furniture.

III. Short Answer Questions

Question 1.
What do you mean by current assets?
Answer:

1. Current assets are those assets which are either in the form of cash or can be easily converted into cash in the normal course of business or within one year.
2. In the words of Howard and Upton, “The current assets are usually defined as those assets which are convertible into cash through the normal course of business within a short time, ordinarily in a year.”
3. Current assets include cash in hand, cash at bank, short-term investments, bills receivable, debtors, prepaid expenses, accrued income, closing stock, etc.
4. Among these, closing stock is valued at cost or realisable value whichever is lower and debtors are shown after deducting a reasonable provision for bad and doubtful debts.

Question 2.
Explain the Intangible fixed assets?
Answer:

1. Intangible fixed assets are those which do not have any physical existence or which cannot be seen or touched.
2. Examples: goodwill, trade-marks, copy rights and patents. Intangible assets are as much valuable as tangible assets because they also help the firm in earning profits.
3. For example, goodwill helps in attracting customers and patents represent the know-how which helps in producing the goods.

Question 3.
What is the Need for preparation of trading account?
Answer:
i) Provides information about gross profit or gross loss:

• It shows the gross profit or gross loss of the business for an accounting year.
• This helps the business persons to find out gross profit ratio by expressing the gross profit as a percentage of sales.
• It helps to compare and analyse with the ratios of the previous years.
• Thus, it provides data for com-parison, analysis and planning for a future period.

ii) Provides an opportunity to safeguard against possible losses:

• If the ratio of gross profit has decreased in comparison to the preceding years, effective measures can be taken to safeguard against future losses.
• For example, the sale price of goods may be increased or steps may be taken to analyse and control the direct expenses.

iii) Provides information about direct expenses and direct incomes:

• All the expenses incurred on the purchase of goods are direct expenses. They are recorded in the trading account.
• Trading account also shows sales revenue, which is a direct income. With the help of trading account, percentage of such expenses on sales revenue can be calculated and compared with similar ratios of the previous years.
• Thus, it enables the management to have control over the direct expenses.

Question 4.
What is the Need for preparation of profit and loss account?
Answer:
i) Ascertainment of net profit or net loss:

• The profit and loss account discloses the net profit available to the proprietor or net loss to be borne by him.
• Ascertainment of profitability helps in planning for the growth and efficiency of a business enterprise.
• Inter-firm comparison and intra-firm comparison of profit and loss account items help in assessing efficiency in comparison with other enterprises and other departments of the same enterprise respectively.

ii) Comparison of profit – The net profit of the current year can be compared with the profit of the previous years. It helps to know whether the business is conducted efficiently or not.

iii) Control on expenses – Profit and loss account helps in comparing various expenses with the expenses of the previous years. The percentage of individual expenses to net sales can be calculated and compared with the similar ratios of previous years. Such a comparison will be helpful in taking effective steps for controlling unnecessary expenses.

iv) Helpful in the preparation of balance sheet – A balance sheet can be prepared only after ascertaining the net profit or loss through profit and loss account. Net profit or loss is shown in the balance sheet. Thus, it facilitates preparation of balance sheet.

Question 5.
What is the Need for preparation of balance sheet?
Answer:
a) The main purpose of preparing a balance sheet is to ascertain the true financial position of the business at a particular point of time.

b) It helps in comparing the cost of various assets of the business such as the amount of closing stock, amount due from debtors, amount of fictitious assets, etc.

Moreover as assets and liabilities of similar nature are grouped and presented in balance sheet, a comparative study of these assets and liabilities is facilitated. It helps in comparing the various liabilities of the business.

c) It helps in finding out the solvency position of the firm. The firm’s solvency position is favourable if the assets exceed the external liabilities. The firm’s solvency position is not favourable it the external liabilities exceed the assets.

Question 6.
What are the Characteristics of balance sheet?
Answer:
a) A balance sheet is a part of the final accounts. However, the balance sheet is a statement and not an account. It has no debit or credit sides and as such the words ‘To’ and ‘By’ are not used before the names of the accounts shown therein.

b) A balance sheet is a summary of the personal and real accounts, which have balances. Personal and real accounts having debit balances are shown on the right hand side known as assets side, whereas personal and real accounts having credit balances are shown on the left hand side known as liabilities side.

c) The totals of the two sides of the balance sheet must be equal. If the totals are not equal, it indicates existence of error. It must satisfy the accounting equation, ie., Assets = Capital + Liabilities, following the dual aspect concept.

d) Balance sheet is prepared on a particular date and not for a fixed period. It discloses the financial position of a business on a particular date. It gives the balances only for the date on which it is prepared.

e) It shows the financial position of the business according to the going concern concept.

Question 7.
What is the Classification of assets?
Answer:
a) Fixed assets – Fixed assets are those assets which are acquired or constructed for continued use in the business and last for many years such as land and building, plant and machinery, motor vehicles, furniture, etc. According to Finley and Miller, “Fixed assets are assets of a relatively permanent nature used in the operations of business and not intended for sale”.

b) Current assets – Current assets are those assets which are either in the form of cash or can be easily converted into cash in the normal course of business or within one year. In the words of Howard and Upton, “The current assets are usually defined as those assets which are convertible into cash through the normal course of business within a short time, ordinarily in a year.”

Current assets include cash in hand, cash at bank, short-term investments, bills receivable, debtors, prepaid expenses, accrued income, closing stock, etc.

c) Liquid assets – Liquid assets are the assets which are either in the form of cash or which can be immediately converted into cash within a very short period of time, such as cash at bank, bills receivable, short-term investments, debtors and accrued incomes.

In other words, if prepaid expenses and closing stock are excluded from current assets, the balance is known as liquid assets.

d) Investments – Amount invested outside the business in shares, debentures, bonds and other securities is called investments.

If it is invested for a period more than a year they are called long-term investments. If they are invested for a period less than a year they are short term investments and shown under current assets.

e) Wasting assets – These are the assets which get exhausted gradually in the process of excavation. Examples: mines and quarries.

Question 8.
Explain the type of liabilities.
Answer:
a) Fixed or long-term liabilities – The liabilities which are to be repaid after one year or more are termed as long-term liabilities. Example: Long-term loans.

b) Current or short-term liabilities – The liabilities which are expected to be paid within the normal operating cycle or one year are termed as current or short-term liabilities. These include bank overdraft, creditors, bills payable, outstanding expenses, etc.

c) Contingent liabilities – These are the liabilities which are not certain at the time of preparation of balance sheet. These liabilities may or may not occur.

These are the liabilities which will become payable only on the happening of some specific event which itself is not certain, otherwise these need not be paid. Such liabilities are as follows:

IV. Problems and solutions

Question 1.
From the following particulars prepare the trading account and calculate the gross profit.

Solution:
Trading Account

Question 2.
From the following figures, ascertain the gross profit

Solution:
Trading Account

Question 3.
Front the information given below prepare trading account.

Solution:
Trading Account

Question 4.
From the following particulars calculate gross profit.

Solution:
Trading Account

Question 5.
Calulate the Grose profit from the fllowing figures

Solution:
Trading Account

Question 6.
Prepare profit and loss account for the year ending 31.3.2017

Solution:
Trading Account

Question 7.
From the following information, prepare the Profit and Loss Account of a Trader for the year ending 31st March, 2017.

Solution:

Question 8.
Prepare Trading and Profit Si Loss account from the following information:

Solution:
Trading and Profit & loss A/c Cr

Question 9.
From the following information, prepare a Balance Sheet of Mr.A as at 31st March 2016.

Solution:

Question 10.
From the following information prepare balance sheet

Solution:
Balance Sheet

Question 11.
From the following information prepare trading account for the year ended 31.12.2016.

Solution:
Trading A/c for the year ended 31st Dec 2016

Question 12.
From the following balance extracted from the books of M/S Lavanya and sons, prepare trading account for the year ended 31st March 2017.

Solution:
Trading A/c for the year ended 31st Mar 2017

Question 13.
Prepare trading account for the year ended 31st December 2017 from the following.

Closing stock is valued at ₹ 6,00,000
Solution:
Trading A/c for the year ended 31st Dec 2017

Note: Selling expenses, carriage on sales advertisement and office rent will not appear in trading account as they are indirect expenses.

Question 14.
Following in then extract of a trial balance as on 31st December 2017 prepare trading account.

Solution:
Trading A/c for the year ended 31st Dec 2017

Note:
Closing stock will not appear

Question 15.
From the following information prepare trading account for the year ending 31st December, 2017.

Solution:
Trading A/c for the year ended 31st Dec 2017

Question 16.
Compute cost of goods sold from the following.

Solution:
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 8,000 + 60,000 + 5,000 – 9,000
= ₹ 64,000

Note : Indirect expenses do not form part of cost of goods sold.

Question 17.
Find the amount of sales from the following.

Solution:
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 20,000 + 70,000 + 10,000 – 30,000
= ₹ 70,000
Let the sales be less Gross profit (20% on sales i.e,100) (100 – 20 = 80)
cost of goods sold
Therefore percentage of Gross profit on cost of goods sold is \(\frac { 20 }{ 80 }\) x 100 = 25%
Gross profit = 25% on 70,000 (Ex) \(\frac { 25 }{ 100 }\) x 70,000 = 17,500
Sales = Cost of goods sold + Gross profit
= 70,000 + 17,500
= ₹ 87,500

Question 18.
Following the information prepare profit and loss account for 31st March 2018.

Solution:
Profit and loss account for the year ended 31st march 2018

Question 19.
Prepare the profit and loss account for the year ended 31st December 2017.

Solution:
Profit and loss account for the year ended 31st December 2017

Note: Carriage inwards will not appear in profit and loss account as is a direct expense.

V. Long Answers

Question 1.
The following trial balance of Mr.A is extracted on 31.12.2017. Prepare Trading and Profit and Loss account. The closing stock is valued at ₹ 35,000,

Solution:
Trading and Profit & loss A/c for the year ended 31 Dec 2017

Balance Sheet of Mr. A as on 31.12.2017

Question 2.
From the following balances extracted from the accounts of Shri & Co for year ending 31.03.2018, prepare Trading and Profit & loss account and also Balance sheet as on that date.

Solution:
Trading Account of Shri & Co for the year ended 31 Mar 2018

Balance Sheet as on 31 Mar 2018

Question 3.
From the trial balance f Thiru.Vetri for the year ending 31.12.2017 prepare trading & profit & Loss account for that period and also Balance sheet as on that date.

Closing stock Rs. 1,970; outstanding rent ₹ 60
Solution:
Trading and Profi & loss A/c of Mr. Vetri for the year ended 31 Dec 2017

Balance Sheets as on 31 Dec 2017

Question 4.
The following particulars prepare profits and loss account year ended 31st December 2017.

Solution:
Profit and loss account for the year ended 31st Dec 2017

Question 5.
Following balance of Niruban, prepare balance sheet as on 31st December 2017.

Solution:
Balance Sheet as on 31^st Dec 2017

Question 6.
Prepare trading and profit and loss A/c of about Rahuman for the year ending 31st December, 2016 and balance sheet as on that date. The closing stock on 31st December 2016 was valued at ₹ 2,000

Solution:
Balance Sheet as on 31st Dec 2016

Balance sheet as on 31st December, 2016

Question 7.
Trial balance of sharn, prepare trading and profit and loss account for the year ending 31st December 2013 was valued at 25,00,000

Solution:
Profit and loss account for the year ended 31st Dec 2013

Balance sheet as on sharan 31st December 2017

Question 8.
The trial balance of Ms. Kalpana shows the following balance on March 31.2017

Adjustment:
The closing stock was valued at ₹ 60,000

Balance sheet of Ms. Kalpana as on 31st March 2017

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Accountancy Guide Pdf Chapter 11 Capital and Revenue Transactions Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Accountancy Solutions Chapter 11 Capital and Revenue Transactions

11th Accountancy Guide Capital and Revenue Transactions Text Book Back Questions and Answers

I. Multiple Choice Questions

Choose the correct answer.

Question 1.
Amount spent on increasing the seating capacity in a cinema hall is _______.
a) Capital expenditure
b) Revenue expenditure
c) Deferred revenue expenditure
d) None of the above.
Answer:
a) Capital expenditure

Question 2.
Expenditure incurred ₹ 20,000 for trial run of a newly installed machinery will be _______.
a) Preliminary expense
b) Revenue expenditure
c) Capital expenditure
d) Deferred revenue expenditure
Answer:
c) Capital expenditure

Question 3.
Interest on bank deposits is _______.
a) Capital receipt
b) Revenue receipt
c) Capital expenditures
d) Revenue expenditures
Answer:
b) Revenue receipt

Question 4.
Amount received from IDBI as a medium term loan for augmenting working capital _______.
a) Capital expenditures
b) Revenue expenditures
c) Revenue receipts
d) Capital receipt
Answer:
d) Capital receipt

Question 5.
Revenue expenditure is intended to benefit _______.
a) Past period
b) Future period
c) Current period
d) Any period
Answer:
c) Current period

Question 6.
Pre – operative expenses are _______.
a) Revenue expenditure
b) Prepaid revenue expenditure
c) Deferred revenue expenditure
d) Capital expenditure
Answer:
d) Capital expenditure

II. Very Short Answer Type Question

Question 1.
What is meant by revenue Expenditure?
Answer:

1. The expenditure incurred for day to day running of the business or for maintaining the earning capacity of the business is known as revenue expenditure.
2. It is recurring in nature. It is incurred to generate revenue for a particular accounting period. The revenue expenditure may be incurred in relation with revenue or in relation with a particular accounting period.
3. For example, cost of purchases is a revenue expenditure related to sales revenue. Rent and salaries are related to a particular accounting period.

Question 2.
What is capital expenditure?
Answer:

1. It is an expenditure incurred during an accounting period, the benefits of which will be available for more than one accounting period.
2. It includes any expenditure resulting in the acquisition of any fixed asset or contributes to the revenue earning capacity of the business. It is non- recurring in nature.

Question 3.
What is capital profit?
Answer:
Capital profit is the profit which arises not from the normal course of the business. Profit on sale of fixed asset is an example for capital profit.

Question 4.
Write a short note on revenue receipt.
Answer:
Receipts which are obtained in the normal course of business are called revenue receipts. It is recurring in nature. The amount received is generally small.

Examples:

• Proceeds from sale of goods
• Interest on investments received
• Respet Received
• Dividend from investment in shares.

Question 5.
What is meant by deferred revenue expenditure?
Answer:

1. An expenditure, which is revenue expenditure in nature, the benefit of which is to be derived over a subsequent period or periods is known as deferred revenue expenditure.
2. The benefit usually accrues for a period of two or more years. It is for the time being, deferred from being charged against income. It is charged against income over a period of certain years.

III. Short Answer Questions

Question 1.
Distinguish between capital expenditure and revenue expenditure.
Answer:

Question 2.
Distinguish between capital receipt and revenue receipt.
Answer:

Question 3.
What is deferred revenue expenditure? Give two examples.
Answer:
1. An expenditure, which is revenue expenditure in nature, the benefit of which is to be derived over a subsequent period or periods is known as deferred revenue expenditure.

2. The benefit usually accrues for a period of two or more years. It is for the time being, deferred from being charged against income. It is charged against income over a period of certain years.

Examples:

• Considerable amount spent on advertising
• Major repairs to plant and machinery

IV. Exercises

Question 1.
State whether the following expenditures are capital, revenue or deferred revenue.

1. Advertising expenditure, the benefits of which will last for three years.
2. Registration fees paid at the time of registration of a building.
3. Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.

Solution:

1. Deferred revenue expenditure
2. Capital Expenditure
3. Capital Expenditure

Question 2.
Classify the following items into capital and revenue.

1. Registration expenses incurred for the purchase of land.
2. Repairing charges paid for remodeling the old building purchased.
3. Carriage paid on goods purchased.
4. Legal expenses paid for raising of loans

Solution:

1. Capital
2. Capital
3. Revenue
4. Capital

Question 3.
State whether they are capital and revenue.
Answer:

1. Construction of building ₹ 10,00,000.
2. Repairs to furniture ₹ 50,000.
3. White-washing the building ₹ 80,000
4. Pulling down the old building and rebuilding ₹ 4,00,000

Solution:

1. Capital
2. Revenue
3. Revenue
4. Capital

Question 4.
Classify the following items into capital and revenue.

1. ₹ 50,000 spent for railway siding.
2. Loss on sale of old furniture
3. Carriage paid on goods sold.

Solution:

1. Capital
2. Revenue
3. Revenue

Question 5.
State whether the following are capital, revenue and deferred revenue.

1. Legal fees paid to the lawyer for acquiring a land ₹ 20,000.
2. Heavy advertising cost of ₹ 12,00,000 spent on introducing a new product.
3. Renewal of factory licence ₹ 12,000.
4. A sum of ₹ 4,000 was spent on painting the factory.

Solution:

1. Capital
2. Deferred Revenue
3. Revenue
4. Revenue

Question 6.
Classify the following receipts into capital and revenue.

1. Sale proceeds of goods ₹ 75,000.
2. Loan borrowed from bank ₹ 2,50,000
3. Sale of investment ₹ 1,20,000.
4. Commission received ₹ 30,000.
5. ₹ 1,400 wages paid in connection with the erection of new machinery.

Solution:

1. Revenue
2. Capital
3. Capital
4. Revenue
5. Capital

Question 7.
Identify the following items into capital or revenue.

1. Audit fees paid ₹ 10,000.
2. Labour welfare expenses ₹ 5,000.
3. ₹ 2,000 paid for servicing the company vehicle.
4. Repair to furniture purchased second hand ₹ 3,000.
5. Rent paid for the factory ₹ 12,000

Solution:

1. Revenue
2. Revenue
3. Revenue
4. Capital
5. Revenue

11th Accountancy Guide Capital and Revenue Transactions Additional Important Questions and Answers

I. Choose the correct answer.

Question 1.
Expenses on research and development will be classified under _______.
a) Preliminary expense
b) Revenue expenditure
c) Capital expenditure
d) Deferred revenue expenditure
Answer:
d) Deferred revenue expenditure

Question 2.
Depreciation on fixed asset is a _______ expenditure.
a) Capital expenditure
b) Revenue expenditure
c) Deferred revenue expenditure
d) None of the above.
Answer:
b) Revenue expenditure

Question 3.
Revenue receipts are _______ in the business.
a) non-recurring
b) recurring
c) neither of the above
d) A AND B
Answer:
b) recurring

Question 4.
An plant worth ₹ 8,000 is sold for ₹ 8,500 the capital receipt amounts to _______.
a) ₹ 8,000
b) ₹ 8,500
c) ₹ 500
d) ₹ 165
Answer:
c) ₹ 500

Question 5.
An asset worth ₹ 1,00,000 is sold for ₹ 85,000 the capital loss amounts to _______.
a) ₹ 85,000
b) ₹ 1,00,000
c) ₹ 15,000
d) ₹ 70000
Answer:
c) ₹ 15,000

Question 6.
An asset worth ₹ 1,00,000 is sold for ₹ 75,000 the capital loss amounts to
a) ₹ 1,75,000
b) ₹ 1,00,000
c) ₹ 75,000
d) ₹ 25,000
Answer:
c) ₹ 75,000

Question 7.
Transaction which provide benefit to*the business for more than one year is called as _______.
a) Capital expenditure
b) Revenue expenditure
c) Deferred revenue expenditure
d) None of the above
Answer:
c) Deferred revenue expenditure

Question 8.
Revenue expenditure is intended to benefit.
a) Subsequent year
b) previous’ year
c) current year
d) None of the above
Answer:
c) current year

II. Very Short Answer Type Questions

Question 1.
What is revenue loss?
Answer:
Revenue losses are the losses that arise from the normal course of the business. In other words, ‘net loss’ – i.e., excess of revenue expenditures over revenue receipts.

Question 2.
Write a short note on Capital receipt.
Answer:
Receipt which is not revenue in nature is called capital receipt. It is non-recurring in nature. The amount received is normally substantial. It is shown on the liabilities side of the balance sheet.

Question 3.
Write the Features of capital expenditure?
Answer:

1. It gives benefit for more than one accounting period.
2. It includes acquisition of fixed assets and all expenditure incurred upto the point an asset is ready for use.
3. It contributes to the revenue earning capacity of the business.
4. It is non-recurring in nature.
5. It is shown on the assets side of the balance sheet.

Question 4.
Write the Features of revenue expenditure?
Answer:

1. It is recurring in nature.
2. It is incurred for maintaining the earning capacity of the business.
3. Its benefit expires in the same accounting period.
4. It is shown on the debit side of the trading and profit and loss account.

Question 5.
Write the Features of deferred revenue expenditure?
Answer:

1. It is a revenue expenditure, the benefit of which is to be derived over a subsequent period or periods.
2. It is not fully written off in the year of actual expenditure. It is written off over a period of certain years.
3. The balance available after writing off (i.e., Actual expenditure – Amount written off) is shown on the assets side balance sheet.

Question 6.
Distinguish Capital, Revenue 8i Deferred revenue expenditure.
Answer:

III. Short Answer Questions

Question 1.
Classify the following expenditures and receipts as capital or revenue

1. ₹ 10,000 spent as travelling expenses of the directors on trips abroad for the purchase of fixed assets.
2. Amount received from trade receivables during the year.
3. Amount spent on demolition of building to construct a large building on the same site.
4. Insurance claim received on account of machinery damaged by fire.

Solution:

1. Capital expenditure
2. Revenue receipt
3. Capital expenditure
4. Capital receipt.

Question 2.
Classify the following expenses as capital or revenue.
(i) The sum of ₹ 3,200 has been spent on a machine as follows:

• ₹ 2,000 for additions to double the output.
• ₹ 1,200 for repairs necessitated by negligence.

(ii) Overhauling expenses of ₹ 25,000 for the engine of a motor car to get better fuel efficiency.
Solution:
(i) a. capital expenditure
b. revenue expenditure

(ii) capital expenditure.

Question 3.
State whether the following are capital or revenue items.

1. ₹ 5,000 spent towards additions to buildings.
2. Second-hand motor car purchased for ₹ 30,000 and paid ₹ 2,000 as repairs immediately.
3. ₹ 10,000 was spent on painting the new factory.
4. Freight and cartage on the new machine ₹ 150, erection charges ₹ 200.
5. ₹ 150 spent on repairs before using a second hand car purchased recently.

Solution:

1. Capital expenditure.
2. Capital expenditure.
3. Capital expenditure.
4. Capital expenditures.
5. Capital expenditure.

Question 4.
State whether the following are capital, revenue or deferred revenue expenditure.

1. Carriage of ₹ 1,000 spent on machinery purchased and installed.
2. Office rent paid ₹ 2,000.
3. Wages of ₹ 5,000 paid to machine operators.
4. Hire charges for the use of motor vehicle, hired for five years, but paid yearly.

Solution:

1. Capital expenditure.
2. Revenue expenditure.
3. Revenue expenditure.
4. Revenue expenditure.

Question 5.
State with reasons whether the following are capital or revenue expenditure

1. Expenses incurred in connection with obtaining a licence for starting the factory for ₹ 25,000.
2. A factory shed was constructed at a cost of ₹ 2,00,000. A sum of ₹ 10,000 had been incurred in the construction of temporary huts for storing building material.
3. Overhaul expenses of second-hand machinery purchased amounted to ₹ 5,000.

Solution:

1. Capital expenditure.
2. Capital expenditure.
3. Capital expenditure.

Question 6.
State with reasons whether the following are capital or revenue or deferred revenue expenditure

1. Advertisement expenses amounted to ₹ 10 crores to introduce a new product.
2. Expenses on freight for purchasing new machinery.
3. Freight and insurance on the new machinery and cartage paid to bring the new machinery to the factory.

Solution:

1. Deferred revenue expenditure.
2. Capital expenditure.
3. Capital expenditure.

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Accountancy Guide Pdf Chapter 10 Depreciation Accounting Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Accountancy Solutions Chapter 10 Depreciation Accounting

11th Accountancy Guide Depreciation Accounting Text Book Back Questions and Answers

I. Multiple Choice Questions

Choose the correct answer.

Question 1.
Under straight line method, the amount of depreciation is _______.
a) Increasing every year
b) Decreasing every year
c) Constant for all the years
d) Fluctuating every year
Answer:
c) Constant for all the years

Question 2.
If the total charge of depreciation and maintenance cost are considered, the method that provides a uniform charge is _______.
a) Straight line method
b) Diminishing balance method
c) Annuity method
d) Insurance policy method
Answer:
b) Diminishing balance method

Question 3.
Under the written down value method of depreciation, the amount of depreciation is _______.
a) Uniform in all the years
b) Decreasing every year
c) Increasing every year
d) None of the above
Answer:
b) Decreasing every year

Question 4.
Depreciation provided on machinery is debited to _______.
a) Depreciation account
b) Machinery account
c) Trading account
d) Provision for depreciation account
Answer:
a) Depreciation account

Question 5.
Cash received from sale of fixed asset is credited to _______.
a) Profit and loss account
b) Fixed asset account
c) Depreciation account
d) Bank account
Answer:
b) Fixed asset account

Question 6.
Depreciation is provided on _______.
a) Fixed assets
b) Current assets
c) Outstanding charges
d) All assets
Answer:
a) Fixed assets

Question 7.
Depreciation is caused by _______.
a) Lapse of time
b) Usage
c) Obsolescence
d) a, b and c
Answer:
d) a, b and c

Question 8.
Depreciation is the process of _______.
a) Allocation of cost of the asset to the period of its useful life
b) Valuation of assets
c) Maintenance of an asset in a state of efficiency
d) Adding value to the asset
Answer:
a) Allocation of cost of the asset to the period of its useful life

Question 9.
For which of the following assets, the depletion method is adopted for writing off cost of the asset?
a) Plant and machinery
b) Mines and quarries
c) Buildings
d) Trademark
Answer:
b) Mines and quarries

Question 10.
A depreciable asset may suffer obsolescence due to _______.
a) Passage of time
b) Wear and tear
c) Technological changes
d) None of the above.
Answer:
c) Technological changes

Question 11.
Which method shall be efficient, if repairs and maintenance cost of an asset increases as it grows older.
a) Straight line method
b) Reducing balance method
c) Sinking fund method
d) Annuity method
Answer:
b) Reducing balance method

Question 12.
Depreciation is to be calculated from the date when _______.
a) Asset is put to use
b) Purchase order is made
c) Asset is received at business premises
d) Invoice of assets is received
Answer:
a) Asset is put to use

Question 13.
If the rate of depreciation is same, then the amount of depreciation under straight line method vis-a-written down value method will be _______.
a) Equal in all years
b) Equal in the first year but higher in subsequent years
c) Equal in the first year but lower in subsequent years
d) Lower in the first year but equal in subsequent years.
Answer:
b) Equal in the first year but higher in subsequent years

Question 14.
Residual value of an asset means the amount that it can fetch on sale at the _______ of its useful life.
a) Beginning
b) End
c) Middle
d) None
Answer:
b) End

II. Very Short Answer Type Questions

Question 1.
What is meant by depreciation?
Answer:

• The process of allocation of the relevant cost of a fixed asset over its useful life is known asdepreciation.
• It is an allocation of cost against the benefit derived from a fixed asset during an accounting period.

Question 2.
List out the various methods of depreciation.
Answer:
The following are the different methods of providing depreciation

• Straight line method or Fixed installment method or Original cost method
• Written down value method or Diminishing balance method
• Sum of years of digits method
• Machine hour rate method
• Depletion method
• Annuity method.
• Revaluation method
• Sinking fund method
• Insurance policy method

Question 3.
Give the formula to find out the amount and rate of depreciation under straight line method of depreciation.
Answer:

Question 4.
What is annuity method?
Answer:
1. Under this method, not only the original cost of the asset but also the amount of interest on the investment is taken into account while computing depreciation.

2. The idea of considering interest is that if the investment is made in any other asset instead of the relevant fixed asset, it would have earned a certain rate of interest.

3. To calculate the amount of depreciation, annuity factor is used. Annuity factor can be found out from the annuity table or by using formula.

4. Amount of depreciation is computed as follows:
Amount of depreciation = Annuity factor x Original cost of the asset

Question 5.
What is sinking fund method?
Answer:
1. Sinking fund method is adopted especially when it is desired not merely to write off an asset but also to provide enough funds to replace an asset at the end of its working life.

2. Under this method, theamount charged as depreciation is transferred to depreciation fund and invested outside thebusiness.

3. This method of depreciation is suitable for assets of higher value.

4. This method is also known as depreciation fund method.

5. This method not only takes into account depreciation but also makes provision for the replacement of the asset.

III. Short Answer Questions

Question 1.
What are the objectives of providing depreciation?
Answer:
Following are the objectives of providing depreciation:

1. To find out the true profit:

• According to matching principle, the expenses incurred during a period must be matched with reve¬nue earned during that period.
• Hence, when an asset is used for generating income for a business, the cost of the asset attributable to the use, i.e., the reduction in the book value of the asset proportionate to the benefit derived from it, should be charged against the revenue.
• This is to be done to find out the true cost of production and profit or loss of the business for every accounting period.

2. To present the true and fair view of financial position:

• When the depreciation is charged on fixed assets, the book value of fixed assets are reduced to that extent and the remaining value is shown in the balance sheet.
• The balance represents the value of benefit that is yet to be derived from them.
• The written down value is the true value of fixed assets which represent cost not yet written off.
• The balance sheet must represent a true and fair view of financial status.
• Hence, fixed assets must be shown at their at written downvalue.

3. To facilitate replacement of fixed assets:

• When the depreciation is debited to profit and loss account, an equal amount is either retained in the business or invested outside the business.
• When the useful life of an asset comes to anend, a new asset can be purchased by using the resources available in the business.

4. To avail tax benefits:

• As per the Indian Income Tax Act, while computing tax on business income, depreciation is deductible from income.
• Hence, depreciation is computed and charged to profit and iossaccount to reduce tax liability. (v)To comply with legal requirements:
• Depreciation is provided on fixed assets to comply with the provisions of law apart from Income Tax Act.
• For example, Section 123(1) of the Indian Companies Act, 2013, requires every company to provide depreciation on fixed assets before declaring dividend to its shareholders.

Question 2.
What are the causes for depreciation?
Answer:
1. Wear and Tear:

• The physical deterioration of assets due to normal use is called wear and tear.
• The value of the assets decreases proportionately.

2. Efflux of time:
Some kinds of assets become potentially less useful with the passage of time whether used or not.

3. Obsolescence:

• It is a reduction in the value of assets as a result of the availability of updated alternative assets.
  This happens due to new inventions and innovations.
• Though the original asset is in a usable condition, it is not preferred by the users and it loses its value
• For example, preference of latest computers by the users.

4. Inadequacy for the purpose:

• In some cases, the use of assets may be stopped due to their inadequacy for the purpose.
• These may become inadequate due to expansion in the capacity of a firm.

5. Lack of maintenance:

• The good maintenance naturally increase the life of the asset.
• When there is lack of maintenance, there is possibility of more depreciation.

6. Abnormal factors:

• Decline in the usefulness of fixed asset may be caused by abnormal factors like damage due to fire accidents, natural calamities etc.
• This leads to the state of asset being discarded.

Question 3.
State the advantages and limitations of straight line method or depreciation.
Answer:
Following are the merits of straight line method of depreciation
Advantages:
(a) Simple and easy to understand – Computation of depreciation under this method is very simple and easy to understand.

(b) Equality of depreciation burden – Equal amount of depreciation is debited to the profit and loss account each year to reduce the burden of depreciation on the profit of each year is equal.

(c) Assets can be completely written off – The book value of an asset can be reduced to zero if there is no scrap value or to be the scrap value at the end of its useful life. The asset account can be completely written off.

(d) Suitable for the assets having fixed working life – This method is appropriate for the fixed assets having certain fixed period of working life. In such cases, the estimation of useful life is easy and in turn in helps in easy determination of rate of depreciation.

Limitations:
(a) Ignores the actual use of the asset – A fixed amount of depreciation is provided on each asset by applying the predetermined rate of depreciation on its original cost. But the actual use of the asset is not considered in computation of depreciation.

(b) Ignores the interest factor – This method does not take into account the loss of interest on the amount invested in the asset.

(c) Total charge on the assets will be more when the asset becomes older – The amount of depreciation and cost of maintenance put together is less in the initial period and goes up year after year. This method did not concentrate on this.

(d) Difficulty in the determination of scrap value – It may be quite difficult to assess the true scrap value of the asset after a long period after the date of its installation.

Question 4.
State the advantages and limitations of written down value method of depreciation.
Answer:
Advantages
(a) Equal Charge against income

• In the starting period depreciation is high and repaid charges are low.
• When the asset becomes older, the amount of depreciation charged is less but repair charges are high.
• The total burden on profit in respect of depreciation and repairs put together remains almost similar year after year.

(b) Logical Method:

• In the earlier years, when the asset is more productive, high depreciation is charged.
• In the later years when the asset becomes less productive, the depreciation charge is less.

Limitations:
(a) Assets cannot be completely written off – Under this method, the value of an asset even if it becomes obsolete and useless, cannot be reduced to zero and some balance would continue in the asset account.

(b) Ignores the interest factor – This method does not take into account the loss of interest on the amount invested in the asset. The amount would have earned interest, had it been invested outside the business is not considered.

(c) Difficulty in determining the rate of depreciation – Under this method, the rate of providing depreciation cannot be easily determined. The rate is generally kept higher because it takes very long time to write off an asset down to its scrap value.

(d) Ignores the actual use of the asset – Under this method, a fixed rate of depreciation is provided on the written down value of the asset by applying the predetermined rate of depreciation on its original cost. But the actual use of the asset is not considered in the computation of depreciation.

Question 5.
Distinguish between straight line method and written down value method of providing depreciation.
Answer:

IV. Exercises

Straight line Method:

Question 1.
A firm purchased plant for ₹ 40,000. Erection charges amounted to ₹ 2,000. Effective life of the plant is 5 years. Calculate the amount of depreciation per year under straight line method.
Solution:

Question 2.
A company purchased a building for ₹ 50,000. The useful life of the building is 10 years and the residual value is ₹ 2,000. Find out the amount and rate of depreciation under straight line method.
Solution:

Question 3.
Furniture was purchased for ₹ 60,000 on 1-7-2016. It is expected to last for 5 years. Estimated scrap at the end of five years is ₹ 4,000. Find out the rate of depreciation under straight line method.
Solution:

Question 4.
Calculate the rate of depreciation under straight line method from the following information
Purchased a second hand machinery on 1.1.2018 for ₹ 38,000
On 1.1.2018 spent ₹ 12,000 on its repairs
Expected useful life of machine is 4 years
Estimated residual value ₹ 6,000
Solution:

Note:
Original cost = Purchases price + repairs = 38,000 + 12,000 = ₹ 50,000

Question 5.
Calculate the rate of depreciation under straight line method.
Purchase price of a machine ₹ 80,000
Expenses to be capitalized ₹ 20,000
Estimated residual value ₹ 4,000
Expected useful life 4 years
Solution:

Note:
Original cost = Purchases price + Expense to be Capitalized
= 80,000 + 20,000
= ₹ 1,00,000

Question 6.
Machinery was purchased on 1^st January 2015 for ₹ 4,00,000. ₹ 15,000 was spent on its erection and ₹ 10,000 on its freight charges. Depreciation is charged at 10% per annum on straight line method. The books are closed on 31^st March each year. Calculate the amount of depreciation on machinery for the first two years.
Solution:
Calculation on the amout of depreciation on machinery

Amount of depreciation
31-3-2015 = ₹ 10625
31-3-2016 = ₹ 42500
Note:
Original cost = Purchases price + Erection charges + freight charges
= 4,00,000 + 15,000 + 10,000 = ₹ 4,25,000

Question 7.
An asset is purchased on 1.1.2016 for ₹ 25,000. Depreciation is to be provided annually according to straight line method. The useful life of the asset is iO years and its residual value is ₹ 1,000. Accounts are closed on 31st December every year. You are required to find out the rate of depreciation and give journal entries for first two years.
Solution:

Question 8.
From the following particulars, give journal entries for 2 years and prepare machinery account under straight line method of providing depreciation:
Machinery was purchased on 1.1.2016
Price of the machine ₹ 36,000
Freight charges ₹ 2,500
Installation charges ₹ 1,500
Life of the machine 5 years
Solution:

Journal entries:

Machinary Account:

Question 9.
A manufacturing company purchased on 1 April, 2010, a plant and machinery for ₹ 4,50,000 and spent ₹ 50,000 on its installation. After having used it for three years, it was sold for ₹ 3,85,000. Depreciation is to be provided every year at the rate of 15% per annum on the fixed installment method. Accounts are closed on 31st March every year.
Solution:
Calculate profit or loss on sale of machinery.

Profit on sales = sale price – Book value
= 3,85,000 – 2,75,000
= ₹ 1,10,000

Question 10.
On 1st April 2008, Sudha and Company purchased machinery for ₹ 64,000. To instal the machinery expenses incurred was ₹ 28,000. Depreciate machinery 10% p.a. under straight line method. On 30th June, 2010 the worn out machinery was sold for ₹ 52,000. The books are closed on 31st December every year. Show machinery account.
Solution:
Machinary Account

Question 11.
Ragul purchased machinery on April 1, 2014 for ₹ 2,00,000. On 1st October 2015, a new machine costing ₹ 1,20,000 was purchased. On 30th September 2016, the machinery purchased on April 1, 2014 was sold for ₹ 1,20,000. Books of accounts are closed on 31st March and depreciation is to be provided at 10% p.a. on straight line method. Prepare machinery account and depreciation account for the years 2014-15 to 2016-17.
Solution:
Machinery Account

Depreciation Account

Notes

Question 12.
An asset is purchased for ₹ 50,000. The rate of depreciation is 15% p.a. Calculate the annual depreciation for the first two years under diminishing balance method.
Solution:

Question 13.
A boiler was purchased on 1^st January 2015 from abroad for ₹ 10,000. Shipping and forwarding charges amounted to 12,000. Import duty ₹ 7,000 and expenses of installation amounted to ₹ 1,000. Calculate depreciation for the first 3 years @10% p.a. on diminishing balance method assuming that the accounts are dosed 31^st December each year.
Solution:
Calculate the amount of Depreciation
Cost of the assets = Purchase price + shipping and forwarding charges + Import duty+Install – action charge.
= 10,000 + 2,000 + 7,000 + 1,000
= ₹ 20,000.

Question 14.
A furniture costing ₹ 5,000 was purchased on 1.1.2016, the installation charges being ₹ 1,000. The furniture is to be depreciated @10% p.a. on the diminishing balance method. Pass journal entries for the first two years.
Solution:

Question 15.
A firm acquired a machine on 1^st April 2015 at a cost of ₹ 50,000. Its life is 6 years. The firm writes off depreciation @ 30% p.a. on the diminishing balance method. The firm closes its books on 31st December every year. Show the machinery account and depreciation account for three years starting from 1^st April 2015.
Solution:
Machinary Account

Depreciation Account

Question 16.
A firm purchased a machine for ₹ 1,00,000 on 1-7-2015. Depreciation is written off at 20% on reducing balance method. The firm closes its books on 31st December each year. Show the machinery account upto 31-12-2017.
Solution:
Machinary Account

Question 17.
On 1st October 2014, a truck was purchased for ₹ 8,00,000 by Laxmi Transports Ltd. Depreciation was provided @ 15% p.a. under diminishing balance method. On 31st March 2017, the above truck was sold for ₹ 5,00,000. Accounts are closed on 31st March every year. Find out the profit or loss made on the sale of the truck.
Solution:
Calculation of Profit (or) Loss on sales of assets.

Question 18.
On 1st January 2015, a second hand machine was purchased for ₹ 58,000 and ₹ 2,000 was spent on its repairs. On 1st July 2017, it was sold for ₹ 28,600. Prepare the machinery account for the years 2011 to 2013 under written down value method by assuming the rate of depreciation as 10% p.a. and the accounts are dosed on 31st December every year.
Solution:

Machinery Account

Question 19.
Raj & Co purchased a machine on 1^st January 2014 for ₹ 90,000. On 1st July 2014, they purchased another machine for ₹ 60,000. On 1st January 2015, they sold the machine purchased on 1st January 2014 for ₹ 40,000. It was decided that the machine be depreciated at 10% per annum on diminishing balance method. Accounts are closed on 31st December every year. Show the machinery account for the years 2014 and 2015.
Solution:

Machinery Account

11th Accountancy Guide Depreciation Accounting Additional Important Questions and Answers

I. Choose the correct answer.

Question 1.
Depreciation is calculated on ________ under diminishing balance method.
a) Original Cost
b) Written Down Value
c) The Scrap Value
d) None of the above
Answer:
b) Written Down Value

Question 2.
Sinking Fund is also known as ________.
a) Depletion Method
b) Annuity method
c) Depreciation Fund method
d) None of the above
Answer:
c) Depreciation Fund method

Question 3.
The process of becoming out of date or obsolete is termed as ________.
a) Depletion
b) Physical Deterioration
c) Obsolescence
d) None of the above
Answer:
c) Obsolescence

Question 4.
In the process of provision method of depreciation the asset always valued at ________.
a) Market Price
b) Cost Price
c) Scrap Value
d) None
Answer:
b) Cost Price

Question 5.
Meaning of Salvage value is ________.
a) Cash to be paid when asset is disposed off
b) Estimated disposal value
c) Definite sale price of the asset
d) Cash to be received when life of the asset ends
Answer:
b) Estimated disposal value

Question 6.
In the accounting records, the fixed assets are normally recorded ________.
a) At Cost
b) At Book Value
c) At Scrap Value
d) At replacement value
Answer:
a) At Cost

Question 7.
A fixed asset was bought for ₹ 5,000. Its accumulated depreciation is ₹ 1,000 and rate of depreciation is 10%. What are the depreciation expenses for the current accounting period using reducing balance method?
a) ₹ 600
b) ₹ 2000
c) ₹ 500
d) ₹ 400
Answer:
c) ₹ 500

Question 8.
Under which depreciation method the amount of depreciation expenses remains same throughout the useful life of a fixed asset ________.
a) Straight Line Method
b) Reducing Balance Method
c) Number of Units produced method
d) Machine hour method
Answer:
a) Straight Line Method

Question 9.
The book value of machinery on 01.04.2016 was ₹ 70, 000. Depreciation is charged at 10% p.a under Written Down value method on 31st March every year. The machine was sold for ₹ 50, 000 on 01.8.2017;calculate the Profit/Loss on sale of machinery.
a) Profit ₹ 5,755
b) Profit ₹ 5,000
c) Profit ₹ 10,375
d) Loss ₹ 10,325
Answer:
c) Profit ₹ 10,375

Question 10.
The objectives of providing depreciation on an asset are ________.
a) To ascertain the true profit/loss of the firm
b) To provide funds for the replacement of the fixed assets
c) To show the true financial position of the firm
d) All of the above
Answer:
d) All of the above

Question 11.
Cost of an asset is ₹ 3, 00,000. Rate of depreciation is 10% on WDV method. Value of the asset at the end of the second year will be ________.
a) ₹ 2, 70,000
b) ₹ 30, 000
c) ₹ 2, 50,000
d) ₹ 2, 43,000
Answer:
d) ₹ 2, 43,000

Question 12.
Depletion method of charging depreciation is adopted for which of the following assets?
a) Plant and Machinery
b) Buildings
c) Wasting assets like mines and quarries
d) Trademarks
Answer:
c) Wasting assets like mines and quarries

Question 13.
A trader followed WDV method of depreciation; the book value of assets after 4 years is 24% of original cost. Find rate of depreciation ________.
a) 24%
b) 26%
c) 32%
d) 30%
Answer:
d) 30%

Question 14.
The older name of Straight line method is ________.
a) Annuity method
b) Revaluation method
c) Fixed Installment method
d) None
Answer:
c) Fixed Installment method

Question 15.
Exhaustion is a ________ for depreciation.
a) Cause
b) Non-Cause
c) Both (a) & (b)
d) None
Answer:
a) Cause

Question 16.
Under which method of depreciation, interest is also taken into consideration?
a) Revaluation method
b) Depletion method
c) Annuity method
d) None of the above
Answer:
c) Annuity method

Question 17.
For oil wells ________ method of depreciation is to be followed.
a) Exhaustion
b) Wear & Tear
c) Depletion
d) None of the above
Answer:
a) Exhaustion

Question 18.
Depreciation arises due to the following reason ________.
a) Wear & Tear
b) Fall in the market value
c) Effluxion of time
d) All the above
Answer:
d) All the above

Question 19.
When the value of fixed assets increases it is known as ________.
a) Depreciation
b) Appreciation
c) Depletion
d) None
Answer:
b) Appreciation

Question 20.
Depreciation on fixed assets is ________ expenditure.
a) Revenue Expenditure
b) Capital Expenditure
c) Deferred Revenue expenditure
d) None
Answer:
b) Capital Expenditure

II. Short Answer Questions

Question 1.
Define Depreciation.
Answer:

1. According to Spicer and Pegler, “Depreciation is the measure of exhaustion of the effective life of an asset from any cause during a given period”.
2. According to R.N. Carter, “Depreciation is the gradual and permanent decrease in the value of an asset from any cause”.

Question 2.
What is ‘residual value’?
Answer:

1. The amount which is expected to be realised at the end of the estimated useful life of an asset is known as scrap value of the asset. It is also known as residual value.
2. In determining the scrap value, costs to be incurred for removal and sale of the asset should be de-ducted from the estimated gross realisable value.

Question 3.
What is ‘Obsolescence’?
Answer:

1. It is a reduction in the value of assets as a result of the availability of updated alternative assets.
2. This happens due to new inventions and innovations.
3. Though the original asset is in a usable condition, it is not preferred by the users and it loses its value.
4. For example, preference of latest computers by the users.

Question 4.
Write notes on ‘Effluxion of time’.
Answer:
Certain assets whether used or not become potentially less useful with the passage of time.

Question 5.
What is ‘Straight Line Method’ of depreciation?
Answer:

1. Under this method, a fixed percentage on the original cost of the asset is charged every year by way of depreciation. Hence it is called original cost method.
2. As the amount of depreciation remains equal in all years over the useful life of an asset it is also called as fixed instalment method.
3. When the amount of depreciation charged over its life is plotted on a graph and the points are joined together, the graph will show a horizontal straight line. Hence, it is called straight line method.

Question 6.
What is’Written down value’of depreciation?
Answer:

1. Under this method, depreciation is charged at a fixed percentage on the written down value of the asset every year. Hence, it is called written down value method.
2. Written down value is the book value of the asset, i.e., original cost of the asset minus depreciation upto the previous accounting period.
3. As the amount of depreciation goes on decreasing year after year, it is called diminishing balance method or reducing installment method.

Question 7.
What is ‘Revaluation method’ of depreciation?
Answer:

1. Under this method, the amount of annual depreciation is calculated by comparing the value of the assets at the end of the year and their value at the beginning of the year.
2. The value of the asset at the end of the year is determined with the consultation of relevant experts.
3. The excess of opening value over the closing value of the asset is the amount of depreciation for that year.
4. This method is used for live stock, loose tools, etc.

Question 8.
What is ‘Insurance policy method’ of depreciation?
Answer:

1. Under this method, an insurance policy is taken for an amount equal to the cost of replacement of the asset.
2. The amount of depreciation is paid by way of insurance premium every year to the insurance company.
3. On maturity of the policy, the policy amount is received from the insurance company and it is used for the purchase of new asset.

Question 9.
What are the factors determining the amount of depreciation?
Answer:
i) Actual cost of the asset:

• Actual cost means the amount incurred in acquiring or constructing the asset.
• It is the acquisition or construction cost or historical cost. It includes all the expenses incurred on the asset to bring the asset to present condition and location, that is, all incidental expenses incurred till it is put into use.
• Purchase price of the asset, freight, loading charges, unloading charges, erection cost, setting up cost and expenses of trial run are included in the cost of the asset.
• If the asset is a second-hand one, the initial repair to make the asset useable is also to be taken as part of actual cost of the asset.

ii) Estimated useful life of the asset:

• The period for which an asset can be used in the enterprise is known as estimated useful life of an asset.
• It can be calculated in terms of period for which the asset is expected to be used by the entity or units of output to be obtained by the use of the asset, etc.
• In the case of intellectual properties like patents and copyrights, their legal life is taken as their estimated useful life.
• The Indian Companies Act, 2013 has prescribed useful lives of fixed assets for the purpose of com – putation of depreciation.
• For example, the useful lives prescribed in Part C of Section 123 for general plant and machinery and general furniture and fittings are 15 years and 10 years respectively.

iii) Scrap value of an asset:

• The amount which is expected to be realised at the end of the estimated useful life of an asset is known as scrap value of the asset. It is also known as residual value.
• In determining the scrap value, costs to be incurred for removal and sale of the asset should be de-ducted from the estimated gross realisable value.

iv) Other factors : Besides the above mentioned factors, legal provisions, technological factors, etc., also determine the amount of depreciation.

Question 10.
What are the Characteristics of depreciation?
Answer:

1. Depreciation is the process of allocation of cost of depreciable asset (capital expenditure) to revenue expenditure or to profit and loss account over the useful life of the asset.
2. It is the process of allocation of cost and not the process of valuation.
3. It is a decrease in the book value of the asset and not the market value of the asset.
4. It is a gradual and continuous decrease in the book value of asset over its useful life.
5. It is calculated only for tangible depreciable fixed assets. Depreciation is not provided on intangible and wasting assets.

Question 11.
Find the amount of depreciation
Cost Price – ₹ 28,000 ; Estimated Life – 6 years; Scrap Value ₹ 4,000
Solution:

Question 12.
On 1st January 2016, Anand Ltd., purchased a machine costing Rs.6, 000. It is estimated that its working life is four years and it will fetch no scrap value. The company decided to write off depreciation according to the fixed installment method. Prepare the machinery account.
Solution:

Question 13.
A company purchased a plant for ₹ 2,00,000. The useful life of the asset is 10 years and the scrap value us ₹ 40, 000. Find the rate of depreciation under the straight line method.
Solution:

III. Long Answer Questions

Question 1.
Find out the rate of depreciation under straight line method.
Cost of asset – ₹ 10,000
Scrap value – ₹ 1,000
Estimated Life 10 years
Solution:

Question 2.
Find out the rate of depreciation under straight line method.
Cost of Plants – ₹ 2,30,000
Installation charges – ₹ 20,000
Expected Life in year 10 years
Scrap value – ₹ 50,000
Solution:

Question 3.
A machine was purchased For ₹ 2,40,000, on 1.1.2010. This is expected to last for five year. Estimated scrap at the end of given year in ₹ 40,000. Find out the rate of depreciation under straight line method.
Solution:

Question 4.
A company has purchased a machinery for ₹ 1,70,000 and spent ₹ 20,000 for its installation. The estimated life of the machinery is 5 years with a residual value of ₹ 15,000. Find out the rate of depreciation under straight line method.
Solution:

Question 5.
Monisha Garments purchased a machinery on 1.4.2015 for ₹ 2,40,000. After three years the plane was sold for ₹ 1,80,000 The firm charges dpreciation at the rate of 10% per annum on stright line method. Accounts are closed on 31st march every year. Prepare machinery account and depreciation A/C.
Notes:
(i) Amount of Depreciation = ₹ 2,40,000
(ii) Book value after three year = 2,40,000 – (24000 x 3) = 2,40,000 – 72,000 = ₹ 1,68,000
(iii) Selling price = ₹ 1,80,000
Profit on sale of machinery = ₹ 72,000
Solution:
Machinary Account

Depreciation Account

Question 6.
Pugazh & CO, purchased a machinery for ₹ 4,70,000. On 1,4.2001 they spent₹ 30,000 on the repairs and installed the machinery. Depreciation is written after at 10% p.a on the straight Sine method on 31.3.2004, the machinery was found the unsuitable and sold for ₹ 3,50,000. Prepare machinery A/C assuming that the account are closed on 31st march every year.

Solution:
Machinery Account

Question 7.
A Company purchased a machinery on 1,4,2001 for ₹ 2,40,000 on 1 October 2002. It purchased another machinery for ₹ 60,000. On 1st October 2003, it sold oft the first machine purchased on 1.4.20C1 for ₹ 1,68,000 on the same date, it purchased another machinery for ₹ 1,50,000 Account are clsoed every year on 31st march depredation is written of at 10% p.a on original cost. Prepare machinery account and depreciation account for three years.
Solution:
I. Machinery purchased on 1.4.2001 for ₹ 2,40,000
1.4.2001 – 31.3.2002 = 24,000 – I^st year
1.4.2002- 31.3.2003 = 24,000 – II^nd year
1.4.2003- 1.10.2003 = 12,000 – III^rd year
Book value = 60,000
(-) Book value = 24,000 – 60,000 = ₹ 1, 80, 000
(-) Sale of machinery = ₹ 1, 68, 000
Loss on sale of machinery ₹ 12, 000

II. Machinery purchased on 1.10.2002 for Rs.60,000
1.10.2002 – 31.3.2003 = 3,000 – II^nd year
1.4.2003 – 31.3.2004 = 6,000 – III^nd year

III. Machinery purchaed on 1.10.2003 for Rs.1,50,000
1.10.2003 – 31.3.2004 = 7,500 – III^rd year

Machinary Account

Depreciation Account

Question 8.
A plant is purchased for ₹ 90,000, It is depreciation as 10% p.a on reducing balance for the three years. When it becomes obsolute due to new method of production and is scrapped. The scrap produces ₹ 66,000 at the end of the thrid year.
Prepare plant account for three year.
Solution:
Calculation of profit or loss on sales of plant.

Plant Account

Question 9.
A firm purchased a machine for ₹ 1,00,000 on 1-7-2015 depreciation is written oft at 10% on reducing balance method. The firm close its book on 31st December each year. Show the machinery account up to 31.12.2017
Solution:
Calculation of profit or loss on sales of machinery.

Machinary Account

Depreciation Account

Question 10.
Dhanuja shree started business on 1st April 2001 and she purchased a machinery for ₹ 1,40,000. She purchased another machinery on 1st November 2002 costing ₹ 30,000. She ( adopted a policy of charging 15% p.a depreciation under Diminishing balance method.
The account are closed every year on 31^st march. Prepare machinery account and depreciation account for the first three years.
Solution:
Calculation of depreciation @ 15 % p.a.

Machinery Account

Depreciation Account

Question 11.
On 1^st January 2014, Hyagreeva Ltd., purchased a machine costing ₹ 12,000. It is estimated that its working life is four years and it will fetch no scrap value. The company decided to write off depreciation according to the fixed instalment method. Prepare the machinery account.
Solution:

Machinary Account

Question 12.
Bharathi Ltd., purchased certain machinery at a cost of ₹ 40,000 on 1st January 2014. They decided to write off depreciation @ 20% p.a, according to straight line method. Prepare Machinery Account and Depreciation Account for the year 2014 to 2017.
Solution:
Machinary Account

Depreciation Account

Question 13.
Shreyan & Co., purchased a computer for ₹ 47,000 on 1st October 2012 and installed it by spending ₹ 3,000. Every year depreciations is to be charged at 10% on its cost. The computer is sold on IstJuly 2015 at a price of ₹ 35,000. Assuming that the accounts are dosed every year on December 31, prepare the computer account.
Solution:
Computer Account

Question 14.
A car was purchased on January 1, 2015 for Rs.80,000 depreciated at 10% on diminishing balance method. It was sold on 31st December 2017 for Rs.50,000. Prepare Car account.
Solution:
Car Account

Question 15.
In a business there was a machine for ₹ 90,000 on 1st January 2014. On 30.06.2014, another machinery was purchased for ₹ 10,000. On 31.12.2014 part of the machine was sold for 3,300, which had a cost price of ₹ 4,000 on 01.01.2014. Prepare machinery account after providing depreciation at 10% p.a on fixed installment basis.
Solution:
Machinary Account

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Accountancy Guide Pdf Chapter 9 Rectification of Errors Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Accountancy Solutions Chapter 9 Rectification of Errors

11th Accountancy Guide Bank Rectification of Errors Text Book Back Questions and Answers

I. Multiple Choice Questions

Choose the correct answer.

Question 1.
Error of principle arises when ________.
a) There is complete omission of a transaction
b) There is partial omission of a transaction
c) Distinction is not made between capital and revenue items
d) There are wrong postings and wrong castings
Answer:
c) Distinction is not made between capital and revenue items

Question 2.
Errors not affecting the agreement of trial balance are ________.
a) Errors of principle
b) Errors of overcasting
c) Errors of undercasting
d) Errors of partial omission
Answer:
a) Errors of principle

Question 3.
The difference in trial balance is taken to ________.
a) The capital account
b) The trading account
c) The suspense account
d) The profit and loss account
Answer:
c) The suspense account

Question 4.
A transaction not recorded at all is known as an error of ________.
a) Principle
b) Complete omission
c) Partial omission
d) Duplication
Answer:
b) Complete omission

Question 5.
Wages paid for installation of machinery wrongly debited to wages account is ah error of ________.
a) Partial omission
b) Principle
c) Complete omission
d) Duplication
Answer:
b) Principle

Question 6.
Which of the following errors will not affect the trial balance?
a) Wrong balancing of an account
b) Posting an amount in the wrong account but on the correct side
c) Wrong totaling of an account
d) Carried forward wrong amount in a ledger account
Answer:
b) Posting an amount in the wrong account but on the correct side

Question 7.
Goods returned by Senguttuvan were taken into stock, but no entry was passed in the books. While rectifying this error, which^of the following accounts should be debited?
a) Senguttuvan account
b) Sales returns account
c) Returns outward account
d) Purchases returns account
Answer:
b) Sales returns account

Question 8.
A credit purchase of furniture from Athiyaman was debited tg purchases account. Which of the following accounts should be debited while rectifying this error?
a) Purchases account
b) Athiyaman account
c) Furniture account
d) None of these
Answer:
c) Furniture account

Question 9.
The total of purchases book was overcast. Which of the following accounts should be debited in the rectifying journal entry?
a) Purchases account
b) Suspense account
c) Creditor account
d) None of the above
Answer:
b) Suspense account

Question 10.
Which of the following errors will be rectified using suspense account?
a) Purchases returns book was undercast by ₹ 100
b) Goods returned by Narendran was not recorded in the books ;
c) Goods returned by Akila ₹ 900 was recorded in the sales returns book as ₹ 90
d) A credit sale of goods to Ravivarman was not entered in the sales book.
Answer:
a) Purchases returns book was undercast by ₹ 100

II. Very Short Answer Type Questions

Question 1.
What is meant by rectification of errors?
Answer:
Correction of errors in the books of accounts is not done by erasing, rewriting or striking the figures which are incorrect. Correcting the errors that has occurred is called Rectification of errors.

Question 2.
What is meant by error of principle?
Answer:
Error of principle means the mistake committed in the application of fundamental accounting principles in recording a transaction in the books of accounts.

Question 3.
What is meant by error of partial omission?
Answer:
When the accountant has failed to record a part of the transaction, it is known as error of partial omission. This error usually occurs in posting. This error affects only one account.

Question 4.
What is meant by error of complete omission?
Answer:
It means the failure to record a transaction in the journal or subsidiary book or failure to post both the aspects in ledger. This error’ affects two or more accounts. ‘

Question 5.
What are compensating errors?
Answer:
The errors that make up for each other or neutralise each other are known as compensating errors. These errors may occur in related or unrelated accounts. Thus, excess debit or credit in one account may be compensated by excess credit or debit in some other account. These are also known as offsetting errors.

III. Short Answer Questions

Question 1.
Write a note on error of principle by giving an example.
Answer:
It means the mistake committed in the application of fundamental accounting principles in recording a transaction in the books of accounts.
The following are the possibilities of error of principle

1) Entering the purchase of an asset in the purchases book
Example: Machinery purchased on credit for ₹ 10,000 by M/s. Anbarasi garments manufacturing company entered in the purchases book.

2) Entering the sale of an asset in the sales book
Example: Sale of old furniture on credit for ₹ 500 was entered in the sales book.

3) Treating a capital expenditure as a revenue expenditure
Examples: An amount of ₹ 3,000 spent on the construction of an additional room is debited to repairs account. Wages of ₹ 600 paid for installation of a new machine is debited to wages account.

4) Treating a revenue expenditure as a capital expenditure
Example: An amount of ₹ 2,000 paid for repairs to a machine is debited to machinery account.

Question 2.
Write a note on suspense account.
Answer:
1. When the trial balance does not tally, the amount of difference is placed to the debit (whenthe total of the credit column is higher than the debit column) or credit (when the total of thedebit column is higher than the credit column) to a temporary account known as ‘suspenseaccount’

2. Suspense account will remain in the books until the location and rectification of errors.

3. Afterrectifying the errors and posting the rectification entries to the respective ledger accounts, thesuspense account appearing in the ledger is to be balanced.

4. If all the errors are located andrectified, the suspense account gets closed.

Question 3.
What are the errors not disclosed by a trial balance?
Answer:
Certain errors will not affect the agreement of trial balance. Though such errors occur in thebooks of accounts, the total of debit and credit balance will be the same. The trial balance willtally. Errors of complete omission, error of principle, compensating error, wrong entry in thesubsidiary books are not disclosed by the trial balance.

Examples of such errors are as follows:

• Treating revenue expenditure as capital expenditure
• Omitting a transaction completely
• Entering a transaction in a wrong subsidiary book
• Entering a transaction twice in a subsidiary book or journal
• Entering the amount of a transaction wrongly in the journal
• Entering the amount of transaction wrongly in the subsidiary book.

Question 4.
What are the errors disclosed by a trial balance?
Answer:
Certain errors affect the agreement of trial balance. If such errors have occurred in the books of accounts, the total of debit and credit balances will not be the same. The trial balance willnottally. Error of partial omission and error of commission affect the agreement of trial balance. Examples of such errors are follows:

• Entered in the journal but posted to one account and omitted to be posted to the other.
• Posting an amount to the wrong side of a ledger account
• Posting twice in a ledger account.
• Over-casting or under-casting in a subsidiary book.
• Posting a wrong amount to the wrong side of an amount.
• Errors in carrying forward the page total from one page to the next page of an account or subsidiary book.
• Errors arising in the balancing of an account.
• Omission to post an entry from a subsidiary book.

Question 5.
Write a note on one-sided errors and two sided error.
Answer:
(a) Rectification of one-sided errors before preparing trial balance:

• When one-sided error is detected before preparing the trial balance, no journal entry isrequired to be passed in the books.
• In such cases, the error can be rectified by giving anexplanatory note in the account affected as to whether the concerned account is to bedebited or credited.
• Example: Sales book is under cast by ₹ 100.
• In this case, the sales book is under cast by ₹ 100.
• The total of sales book is posted to thecredit side of sales account in the ledger.
• The under casting has resulted in under-creditingof sales account by ₹ 100.
• This is an error of commission.
• The error is only in sales account.There is short credit in sales account by ₹ 100. Hence, it is rectified by crediting salesaccount by ₹ 100.

(b) Rectification of two-sided errors before preparing the trial balance:
1. When a two-sided error is detected before preparing the trial balance, it must be rectifiedby passing a rectifying journal entry in the journal proper after analyzing the error.
Example: Goods sold to Anand for ₹ 1,000 on credit was not entered in the sales book. The entry will be

Method of deriving the rectifying entries

IV. Exercises

Question 1.
State the account/s affected in each of the following errors
a) Goods purchased on credit from Saranya for ₹ 150 was posted to the debit side of her account.
b) The total of purchases book ₹ 4,500 was posted twice.
Solution:
a) Saranya account should be credit with ₹ 300
b) Purchases account should be credit with ₹ 4,500

Question 2.
State the account/s affected in each of the following errors
a) Goods sold to Vasu on credit for ₹ 1,000 was not recorded in the sales book.
b) The total of sales book ₹ 2,500 was posted twice.
Solution:
a) Sales account should be credit with ₹ 1,000
b) Sales account should be Debited with ₹ 2,500

Question 3.
Rectify the following errors discovered before the preparation of the trial balance
a) Sales book was undercast by ₹ 100
b) Purchases returns book was overcast by ₹ 200
Solution:
a) Sales account should be Credited with ₹ 100
b) Purchases returns account should be debited with ₹ 200

Question 4.
Rectify the following errors before the preparation of trial balance
a) Returns outward book was undercast by ₹ 2,000
b) Returns inward book total was taken as ₹ 15,000 instead of ₹ 14,000
c) The total of the purchases account was carried forward ₹ 100 less.
Solution:
a) Purchases return account should be Credited with ₹ 2,000
b) Sales returns account should be Debited with ₹ 1,000
c) Purchases accounts should be debited ₹ 100

Question 5.
Rectify the following errors assuming that the trial balance is yet to be prepared
a) Sales book was undercast by ₹ 400
b) Sales returns book was overcast by ₹ 500
c) Purchases book was undercast by ₹ 600
d) Purchases returns book was overcast by ₹ 700
e) Bills receivable book was undercast by ₹ 800
Solution:
a) Sales account should be credited with ₹ 400
b) Sales return accounts should be Credited with ₹ 500
c) Purchases account should be debited with ₹ 600
d) Purchases returns account should be debited with ₹ 700
e) Bills received account should be debited with ₹ 800

Question 6.
Rectify the following errors before preparing trial balance
a) The total of purchases book was carried forward ₹ 90 less.
b) The total of purchases book was carried forward ₹ 180 more.
c) The total of sales book was carried forward ₹ 270 less.
d) The total of sales returns book was carried forward ₹ 360 more.
e) The total of purchase returns book was carried forward ₹ 450 less.
Solution:
a) Purchases account is to be Debited with ₹ 90
b) Purchases account is to be Credited with ₹ 180
c) Sales account is to be Credited with ₹ 270
d) Sales returns account is to be Credited with ₹ 360
e) Purchases returns account is to be Credit with ₹ 450

Question 7.
The following errors were located by the accountant before preparation of trial balance. Rectify them.
a) The total of the discount column of ₹ 1,100 on the debit side of the cash book was not yet osted.
b) The total of the discount column on the credit side of the cash book was undercast by ₹ 500.
c) Purchased goods from Anbuchelvan on credit for ₹ 700 was posted to the debit side of his account.
d) Sale of goods to Ponmukil on credit for ₹ 78 was posted to her account as ₹ 87.
e) The total of sales returns book of ₹ 550 was posted twice.
Solution:
a) Discount account should be debited with ₹ 1,100
b) Discount account should be Credited with ₹ 500
c) Anbuchelvan account should be Credited with ₹ 1,400
d) Ponmuki account should be Credit with ₹ 9
e) Sales return account should be Credit with ₹ 550

Question 8.
The accountant of a firm located the following errors before preparing the trial balance. Rectify them.
a) Machinery purchased for ₹ 3,000 was debited to purchases account.
b) Interest received ₹ 200 was credited to commission account.
c) An amount of ₹ 1,000 paid to Tamil selvan as salary was debited to his personal account.
d) Old furniture sold for ₹ 300 was credited to sales account.
e) Goods worth ₹ 800 purchased from Soundarapandian on credit was not recorded in the books of accounts.
Solution:
Journal Entries

Question 9.
Rectify the following errors which were located before preparing the trial balance.
a) Wages paid ₹ 2,000 for the erection of machinery was debited to wages account.
b) Sales returns book was short totalled by ₹ 1,000.
c) Goods purchased for ₹ 200 was posted as ₹ 2,000 to purchases account.
d) The sales book was overcast by ₹ 1,500.
e) Cash paid to Mukil ₹ 2,800 which was debited to Akhil’s account as ₹ 2,000.
Solution:
Rectification of Errors:

Question 10.
Rectify the following errors which were located at the time of preparing the trial balance
a) The total of the discount column on the debit side of the cash book of ₹ 225 was posted twice.
b) Goods of the value of ₹ 75 returned by Ponnarasan was not posted to his account.
c) Cash received from Yazhini ₹ 1,000 was not posted.
d) Interest received ₹ 300 has not been posted.
e) Rent paid ₹ 100 was posted to rent account as ₹ 10
Solution:
Rectification of Errors

Question 11.
The following errors were located at the time of preparing trial balance. Rectify them.
a) A personal expense of the proprietor ₹ 200 was debited to traveling expenses account.
b) Goods of ₹ 400 purchased from Ramesh on credit was wrongly credited to Ganesh’s account.
c) An amount of ₹ 500 paid as salaries to Mathi was debited to his personal account.
d) An amount of ₹ 2,700 paid for extension of the building was debited to repairs account.
e) A credit sale of goods of ₹ 700 on credit to Mekala was posted to Krishnan’s account.
Solution:
Rectification of Errors

Question 12.
Rectify the following journal entries.

Solution:
Rectification of Errors

Question 13.
Rectify the following errors discovered after the preparation of the trial balance
a) Rent paid was carried forward to the next page ₹ 500 short.
b) Wages paid was carried forward ₹ 250 excess.
Solution:
a) Rent account should be debited with ₹ 500
b) Wages account should be Credited with ₹ 250

Question 14.
Rectify the following errors after preparation of trial balance
a) Salary paid to Ram ₹ 1,000 was wrongly debited to his personal account.
b) A credit sale of goods to Baiu for ₹ 450 was debited to Balan.
Solution:
Rectification of Errors

Question 15.
Pass necessary journal entries to rectify the following errors located after the preparation of trial balance
a) Sales book was undercast by ₹ 1,000.
b) A amount of ₹ 500 paid for wages was wrongly posted to machinery Account.
Solution:
Rectification of Errors

Question 16.
Give journal entries to rectify the following errors discovered after the preparation of trial balance
a) Purchases book was overcast by ₹ 10,000.
b) Repairs to furniture of ₹ 500 was debited to furniture account.
c) A credit sale of goods to Akilnilavan for ₹ 456 was credited to his account as ₹ 654.
Solution:
Rectification of Errors

Question 17.
Rectify the following errors located after the preparation of trial balance
a) Purchases book was undercast by ₹ 900.
b) Sale of old furniture for ₹ 1,000 was credited to sales account.
c) Purchase of goods from Arul for ₹ 1,500 on credit was not recorded in the books.
Solution:
Rectification of Errors

Question 18.
The following errors were located after the preparation of trial balance. Pass journal entries to rectify them. Assume that there exists a suspense account.
a) The total of sales book was undercast by ₹ 350.
b) The total of the discount column on the debit side of cash book ₹ 420 was not posted.
c) The total of one page of the purchases book of ₹ 5,353 was carried forward to the next page as ₹ 5,533.
d) Salaries ₹ 2,400 was posted as ₹ 24,000.
e) Purchase of goods from Sembiyanmadevi on credit for ₹ 180 was posted to her account as ₹ 1,800
Solution:
Rectification of Errors

Question 19.
Rectify the following errors assuming that the trial balance is already prepared and the difference was placed to suspense account
a) Saies book was undercast by ₹ 250
b) Purchases book was undercast by ₹ 120
c) Sales book was overcast by ₹ 130
d) Bills receivable book was undercast by ₹ 75
e) Purchases book was overcast by ₹ 35.’
Solution:
Rectification of Errors

Question 20.
The following errors were located after the preparation of trial balance. The difference in trial balance has been taken to suspense account. Rectify them.
a) The total of purchases book was carried forward ₹ 70 less.
b) The total of sales book was carried forward ₹ 340 more.
c) The total of purchases book was carried forward ₹ 150 more.
d) The total of sales book was carried forward ₹ 200 less.
e) The total of purchase returns book was carried forward ₹ 350 less.
Solution:
Rectification of Errors

Question 21.
The following errors were located by the accountant after the preparation of trial balance. There exists a suspense account. Rectify them.
a) The total of the discount column of ₹ 1,180 on the debit side of the cash book was not posted.
b) Purchase of goods from Arivuchelvan on credit for ₹ 600 was posted to the debit side of his account.
c) The total of the discount column on the credit side of the cash book was undercast by ₹ 400.
d) The total of sales returns book of ₹ 570 was posted twice.
e) Sold goods to Mukil on credit for ₹ 87 was posted to her account as ₹ 78.
Solution:
Rectification of Errors

Question 22.
The accountant of a firm located the following errors after preparing the trial balance. Rectify them assuming that there is a suspense account.
a) Machinery purchased for ₹ 3,500 was debited to purchases account.
b) ₹ 1,800 paid to Raina as salary was debited to his personal account.
c) Interest received ₹ 200 was credited to commission account.
d) Goods worth ₹ 1,800 purchased from Amudhanila on credit was not recorded ip the books of accounts,
e) Used furniture sold for ₹ 350 was credited to sales account.
Solution:
Rectification of Errors

Question 23.
The book-keeper of a firm found that the trial balance was cut by ₹ 922 (excess credit). He placed the amount in the suspense account and subsequently found the following errors
a) The total of discount column on the credit side of the cash book ₹ 78 was not posted in the ledger.
b) The total of purchases book was short by ₹ 1,000.
c) A credit sale of goods to Natarajan for ₹ 375 was entered in the sales book as ₹ 735.
d) A credit sale of goods to Mekala for ₹ 700 was entered in the purchases book.
You are required to give rectification entries and prepare suspense account.
Solution:
Rectification of Errors

Suspense Account

Question 24.
The books of Raman did not agree. The accountant placed the difference of ₹ 1,270 to the debit of suspense account. Rectify the following errors and prepare the suspense account
a) Goods taken by the proprietor for his personal use ₹ 75 was not entered in the books.
b) A credit sale of goods to Shanmugam for ₹ 430 was credited to his account as ₹ 340.
c) A purchase of goods on credit for ₹ 400 from Vivek was entered in the sales book. However, Vivek’s account was correctly credited.
d) The total of the purchases returns book ₹ 300 was not posted.
Solution:
Rectification of Errors

Suspense Account

11th Accountancy Guide Rectification of Errors Additional Important Questions and Answers

I. Choose the correct answer.

Question 1.
Goods of ₹ 5, 000 purchased from Mr.B were recorded in sales book, the rectification of this error will ________.
a) Increase the gross profit
b) Reduce the gross profit
c) Have no effect on gross profit
d) None of the above
Answer:
b) Reduce the gross profit

Question 2.
When one or both aspects of a transaction are recorded in the wrong category of an account, this is called ________.
a) Error of Principle
b) Error of Omission
c) Error of Commission
d) Error of original entry
Answer:
a) Error of Principle

Question 3.
Goods worth l 500 given as charity should be credited to ________.
a) Charity Account
b) Sales Account
c) Purchases Account
d) None of the above
Answer:
c) Purchases Account

Question 4.
₹ 60,000 paid on extension of building wrongly debited to Repairs account. This is called the error of ________.
a) Commission
b) Omission
c) Principle
d) None of these
Answer:
c) Principle

Question 5.
________ are those transactions which are not recorded as per the rules of debit and credit.
a) Error of principle
b) Error of Commission
c) Error of Omission
d) Compensating errors
Answer:
a) Error of principle

Question 6.
________ are those which cancel themselves out.
a) Error of principle
b) Error of Commission
c) Error of Omission
d) Compensating errors
Answer:
d) Compensating errors

Question 7.
________ errors can be located in the preparation of trial balance.
a) Error of principle
b) Error of Commission
c) Error of Omission
d) Compensating errors
Answer:
b) Error of Commission

Question 8.
An entry of ₹ 75 has been debited to Rajesh’s A/c as ₹ 57 is an error of ________.
a) Error of principle
b) Error of Commission
c) Error of Omission
d) Compensating errors
Answer:
b) Error of Commission

Question 9.
Casting errors are the result of ________.
a) Wrong totaling
b) Wrong Balancing
c) wrong carry forward
d) None of the above
Answer:
a) Wrong totaling

Question 10.
Suspense account is usually closed when ________.
a) Accounts are finalised
b) After the completion of auditing
c) All the errors are rectified
d) None of the above
Answer:
c) All the errors are rectified

II. Very Short Answer Questions

Question 1.
What do you mean by error?
Answer:
Error means recording or classifying or summarizing the accounting transactions wrongly or omissions to record them by a clerk or an accountant unintentionally.

Question 2.
At what stages the errors can occur?
The following types of errors may occur in various stages:
Answer:

• At the stage of journalizing
• At the stage of posting
• At the stage of balancing
• At the stage of preparing trial balance

Question 3.
What do you meaning of errors?
Answer:
Error means recording or classifying or summarising the accounting transactions wrongly or omissions to record them by a clerk or an accountant unintentionally.

Question 4.
What is error of omission?
Answer:
The failure of the accountant to record a transaction or an item in the books of accounts is known as an error of omission. It can be complete omission or partial omission.

Question 5.
What is error of commission?
Answer:
When a transaction is incorrectly recorded, it is known as error of commission. It usually occurs due to lack of concentration or carelessness of the accountant.

Question 6.
Write a note on one-sided errors.
Answer:
When one-sided error is detected before preparing the trial balance, no journal entry is required to be passed in the books. In such cases, the error can be rectified by giving an explanatory note in the account affected as to whether the concerned account is to be debited or credited.

Question 7.
Write a note on two sided errors.
Answer:
When a two-sided error is detected before preparing the trial balance, it must be rectified by passing a rectifying journal entry in the journal proper after analysing the error.

III. Short Answer Questions

Question 1.
What are the Steps to be followed to locate the errors after preparation of trial balance?
Answer:
While preparing trial balance, if it does not tally, it is an indication of presence of errors in the books.of accounts. The difference in trial balance is transferred to suspense account and then errors are to be located and rectified.

The following are the steps to be followed to locate errors after preparing trial balance

1. The totals of debit and credit columns of trial balance are to be checked
2. The balances of various ledger accounts shown in the trial balance are to be checked to ensure whether they are shown in the respective columns (debit or credit).
3. The difference in the trial balance must be halved and compared with balances of ledger to verify whether any ledger balance is recorded on the wrong side of the trial balance.
4. The totals of all the subsidiary books are to be checked, especially if the difference is ₹ 1, T 100 etc.
5. If the difference is divisible by ‘9’, the difference may be due to transposition of figures in the books (Writing ₹ 127 as ₹ 172). Hence, the possibilities of transposition of figures shall be checked.
6. The accounts of all the creditors and debtors are to be verified.
7. The correctness of the balances of various ledger accounts is to be ensured.
8. The correctness of the balances of various ledger accounts is to be ensured.
9. All the amounts carried forward from one page to the next are to be verified. .
10. If the difference still exists, as a final step all the entries in the journals should be verified.

Question 2.
What are the Steps to be followed to locate the errors before preparation of trial balance?
Answer:
Errors may be located before preparing the trial balance either spontaneously or by intentional scrutiny of books of accounts.

The following are the steps to be followed to locate errors before preparing trial balance:

1. Scrutiny of entries made in the journal proper
2. Scrutiny of entries made in the subsidiary books
3. Checking the totals of the subsidiary books
4. Scrutiny of postings made to the ledger accounts
5. Scrutiny of balancing of ledger accounts

Question 3.
Spot out the location of errors before preparation of trial balance.
Answer:
Errors may be located before preparing the trial balance either spontaneously or by intentional scrutiny of books of accounts. The following are the steps to be followed to locate errors before preparing trial balance

1. Scrutiny of entries made in the journal proper.
2. Scrutiny of entries made in the subsidiary books.
3. Checking the totals of the subsidiary books
4. Scrutiny of balancing of ledger accounts.
5. Scrutiny of postings made to the ledger accounts

Question 4.
Rectify the following errors

1. Purchases Book is overcast by ₹ 3,500
2. Sales Book is undercast by ₹ 2,000
3. Purchases returns books has been over cast by ₹ 7,600
4. Sales returns book has been undercast by ₹ 500

Solution:
Rectification:

1. Credit Purchases Account with ₹ 3,500
2. Credit Sales Account with ₹ 2,000
3. Debit Purchases Returns account with ₹ 7,600
4. Debit Sales returns account with ₹ 500

Question 5.
Rectify the following errors
1. Sales book undercast by ₹ 5,000
2. Machinery purchased for ₹ 9000 passed through purchases Book.
3. Sales to Ram for ₹ 11,000 debited to his account as ₹ 10,100.
4. Repairs to building ₹ 3,640 debited to buildings account.
Solution:

Question 6.
Rectify the following errors
1. The purchase of machinery from A for ₹ 3,000 has been entered in purchase day book.
2. Received ₹ 1,000 from M but credited to N’s account.
3. ₹ 800 paid as wages for erection of machine has been charged to Repairs account.
4. ₹ 250 received from Ganesh, previously written off, has been credited to Ganesh account
Solution:

Question 7.
Rectify the following Errors
1. Purchase book is overcast by ₹ 6,000
2. Sales book carried forward ₹ 630 instead of ₹ 360
3. Purchase from Sreesha ₹ 5, 000 has been posted to the debit side of her account.
4. Sale of old machinery for ₹ 50,000 has been entered in Sales book.
Solution:

Question 8.
Rectify the following error
1. Salary paid to manager ₹ 8,000 debited to his personal account.
2. Total of discount column in the debit side of the cash book is wrongly cast short. ₹ 540.
3. Total of sales book has been added ₹ 2,400 excess
4. ₹ 230 received in respect of a book debt was posted to sales account
5. Goods sold for ₹ 3,873 to Raju were returned to us and recorded in sales book.
Solution:

Question 9.
When a Trial Balance failed to agree, ₹ 37,900 was transferred to the credit of suspense account. The following errors were discovered. Give journal entries and prepare suspense account.
1. Sales day book was under cast by ₹ 40,000
2. Purchase of machinery for ₹ 60,000 was passed through the purchase book.
3. Goods sold to Velu for ₹ 4,500 was posted to his account as ₹ 5,400.
4. Purchase returns book was overcast by ₹ 2,000
5. The total of sales book from one page was carried forward to the next page as ₹ 12,000 instead of ₹ 11,000.
Solution:
Rectification of Entries

Suspense Account

Question 10.
In considering the trial balance, a book-keeper finds that debit total exceeds the credit total by ₹ 3,520. The amount is placed to the credit of a newly opened suspense account. The following mistakes were discovered. Pass the necessary entries for rectifying the mistakes and show the suspense account.
a) Sales day book was overcast by ₹ 1000
b) A sale of ₹ 500 to Rajesh was wrongly debited to Ramesh
c) General expenses ₹ 180 was posted as ₹ 800.
d) Cash received from Ganesh was debited to his account ₹ 1,500
e) While carrying forward the total of one page of the purchases day book to the next the amount of ₹ 12,350 was entered as ₹ 13,250.
Solution:
Rectification of Entries

Suspense Account

Question 11.
Pass journal entries to rectify the following entries
1. ₹ 4,500 received in respect of a book debt was posted to sales account
2. Defective goods worth ₹ 260 returned to Saran were recorded through sales returns book.
3. Goods sold for ₹ 950 to Rakesh were returned to us and recorded in sales book.
4. A purchase of ₹ 2,100 from Banu on the last day of the year was taken into stock, but the invoice was not passed through the purchase book.
Solution:
Rectification of Entries

Question 12.
Show how you will rectify the following entries .
1. A Credit sales of ₹ 650 to Raja was debited to Kaja.
2. A purchase of goods for ₹ 750 from Shaji was debited to his account.
3. An office typewriter purchased for ₹ 6,500 was debited to Repairs account.
4. A sum of ₹ 3,900 received from a debtor was debited to his account.
5. Purchase of goods for the consumption of proprietor were debited to purchase account ₹ 1,000
Solution:
Rectification of Entries

Question 13.
Write down the rectifying journal entries for the following errors and show the suspense account.
1. The sales returns books has been under cast by ₹ 5,000
2. Goods worth ₹ 1,500 sold to Batiya has been credited to his account.
3. Purchase of furniture ₹ 7,000 has been entered in the purchases account.
4. Cash Rs.4,500 from Aadhira has been posted to his account as ₹ 5,400.
5. A bill received from X for ₹ 4,000 has been posted to Bills payable account.
Solution:
Rectification of Entries

Suspense Account

IV. Long Question Answers

Question 1.
Explain the steps to he followed to locate errors after preparing trial balance
Answer:
The following steps are to be followed to locate errors after preparing trial balance
1. The totals of debit and credit columns of trial balance are to be checked.

2. The balances of various ledger accounts shown in the trial balance are to be checked to ensure whether they are shown in the respective columns (debit or credit).

3. The difference in the trial balance must be halved and compared with balances of ledger to verify whether any ledger balance is recorded on the wrong side of the trial balance.

4. The totals of all the subsidiary books are to be checked, especially if the difference is ₹1 to ₹ 100 etc.

5. If the difference is divisible by 9 the difference may be due to transposition of figures in the books. (Writing ₹ 127 as ₹ 172). Hence, the possibilities of transposition of figures shall be checked.

6. The accounts of all the creditors and debtors are to be verified.

7. Postings from the subsidiary books to different accounts in the ledger are to be checked.

8. The correctness of the balances of various ledger accounts is to be ensured.

9. All the amounts carried forward from one page to the next are to be verified.

10. If the differences still exists, as a final step all the entries in the journals should be verified.

Question 2.
Briefly explain the Classification or errors
Answer:

The failure of the accountant to record a transaction or an item in the books of accounts is known as an error of omission. It can be complete omission or partial omission.
1. Error of complete omission – It means the failure to record a transaction in the journal or subsidiary book or failure to postboth the aspects in ledger. This error affects two or more accounts.

2. Error of partial omission – When the accountant has failed to record a part of the transaction, it is known as error of partial omission. This error usually occurs in posting. This error affects only one account.

3. Error of commission – When a transaction is incorrectly recorded, it is known as error of commission. It usually occurs due to lack of concentration or carelessness of the accountant.

Errors of Principle: It means the mistake committed in the application of fundamental accounting principles inrecording a transaction in the books of accounts.

4. Compensating errors – The errors that make up for each other or neutralize each other are known as compensatingerrors. These errors may occur in related or unrelated accounts. Thus, excess debit or credit inoneaccount may be compensated by excess credit or debit in some other account. These arealso known as offsetting errors.

5. Errors disclosed by the trial balance and errors not disclosed by thetrial balance – Generally, one-sided errors are revealed by trial balance. They will cause disagreement of totals of debit balances and credit balances. Two-sided errors are not revealed by trial balance.

V. Additional Sums

Question 1.
Rectify the following errors
i) Purchases book overcast by ₹ 1,300
ii) Sales book under cast by ₹ 2,500
Solution:
i) Credit – Purchases A/c with ₹ 1,300
ii) Credit – Sales A/c with ₹ 2,500

Question 2.
Rectify the following errors
i) Purchases return book overcast by ₹ 750
ii) Sales return book under cast by ₹ 600
Solution:
i) Debit – Purchases return A/c with ₹ 750
ii) Debit – Sales return A/c with ₹ 600

Question 3.
Rectify the following errors
i) Purchases book is carried forward ₹ 850 Less
ii) Sales book total is carried toward ₹ 2,500 More
Solution:
i) Debit – Purchases A/c with ₹ 850
ii) Debit – Sales A/c with ₹ 2,500

Question 4.
Rectify the following errors
i) A total of ₹ 7,580 in the purchases book has been carried forward as ₹ 8,570
ii) The total of the sales book ₹ 7,500 or page 20 was carried forward to page 21 as ₹ 5,570
iii) Purchases return book was carried forward as ₹ 1,520 instead of ₹ 5,120
Solution:
i) Credit – Purchases A/c with ₹ 990
ii) Credit – Sales A/c with ₹ 1,980
iii) Credit – Purchases return A/c with ₹ 3,600

Question 5.
Rectify the following errors
i) Purchases from Bagavathi for ₹ 4,500 has been posted to the debit side of her account
ii) Sales to Vijay for ₹ 1,520 has been posted to his credit as ₹ 1,250
Solution:
i) Purchases from Bagavathi should have been posted to the credit of Bagavathi’s A/c, but it has been . debited. Hence, credit Bagavathi’s A/c with double the amount i.e, ₹ 9,000

ii) Sales to Vijay has to be debited in Vijay’s account but his account is credited with ₹ 1,250. Hence Debit Vijay’s A/c with ₹ 1,250 to ₹ 1,520 i.e, ₹ 2,770

Question 6.
Rectify the following errors
i) Purchases from should for ₹ 750 has been omitted to be posted to the personal A/c
ii) Sales to Khader for ₹ 780 has been posted to his account as ₹ 870
Solution:
i) This is an error of omission. Posting must be to the credit of Shakila’s A/c. Hence, post ₹ 750 to the credit of Skakila’s A/c.

ii) Here Khader’s has been debited with a wrong amount i.e., with excess amount. To rectify this error, the excess amount must be credited to his account. Hence, Credit Khader’s A/c with ₹ 90.

Question 7.
The following errors were found in the book of pradhu. Give the necessary entries to correct them.
i) Salary of ₹ 10,000 paid to Murali has been debited to his personal account.
ii) ₹ 3,500 paid for a typewriter was charged to office expenses account.
iii) ₹ 8,000 paid for furniture purchased has been charged to purchases account.
iv) Repairs made were debited to building account for ₹ 500
v) An amount of ₹ 5,000 withdrawn by the proprietor for his personal use has been debited to trade expenses account.
iv) ₹ 2,000 received from Shanthi and Co. has been wrongly entered as from Shakila and Co.
Solution:
In the book of Prathu – Rectification of Errors

Question 8.
Give journal entries to rectify the following errors
i) Purchases of goods from Devi amounting to ₹ 25,000 has been wrongly passed through the sales Book.
ii) Credit sale of goods ₹ 30,000 to Rajan has been wrongly passed through the purchases Book
iii) Sold old furniture for ₹ 3,500 passed through the sales Book.
iv) Paid wages for the construction of Building debited to wages account ₹ 1,00,000
v) Paid ₹ 10,000 for the installation of machinery debited to wages account.
vi) On 31st December 2003 goods worth ₹ 5,000 were retuned by Manjia and were taken into stock on the same date, but no entry was passed in the books.
Solution:
Rectification of Errors

Question 9.
An accountant could not tally the Trial Balance. The difference of ₹ 5,180 was Temporality placed to the credit of suspense account for preparing the final account. The following errors were taken located.
i) Commission of ₹ 500 paid, was posted twice, once to, discount allowed account and once to commission account.
ii) The sales book was under cast by ₹ 1,000
iii) A Credit sales of ₹ 2,780 to Raja though correctly entered in sale book, was posted wrongly to her account as Rs.3,860
iv) A Credit purchase from Nataraj of ₹ 1,500, though correctly entered in purchases book, was wrongly debited to his personal account.
v) Discount column of the payments side of the book was wrongly added as ₹ 2,800 instead of ₹ 2,400
You are required to
i) Pass the necessary rectifying entries.
ii) Prepare suspense Account.
Solution:
Rectification of Errors

Suspense Account

Question 10.
Rectify the following Journal Entries
Rectification of Errors

Solution:
Rectification of Errors

Question 11.
Rectify the following Errors
i) ₹ 12,000 paid of salary to cashier Govind, stands debited to his personal account.
ii) An amount of ₹ 5,000 with drawn by the proprietor for his personal use has been debited to trade Expenses A/c
iii) Cash received from Bala ₹ 300 was credited to Balu.
iv) A credit sale of ₹ 2,000 to Janakiram has been wrongly passed through the purchase book.
Solution:
Rectification of Errors

Question 12.
Rectify the following Errors
i) Repairs made were debited to building account ₹ 5,000
ii) Mahesh networked goods worth ₹ 2,000 no Entry was passed in the Book to this Effects
iii) Purchases of goods from Antony amounting to ₹ 1,500 has been debited to his accounts.
iv) ₹ 5,200 paid for the purchases of typewriter was charged to office expenses account.
Solution:
Rectification of Errors

Question 13.
Rectify the following Errors
i) Credit purchases of goods from Madhan of ₹ 300 has been wrongly Entered in the sales book.
ii) ₹ 500 received from Seivan has been credited to Selvi’s account
iii) ₹ 1,000 received as interest was credited to commission account.
iv) Sales book total ₹ 878 was wrongly totalled as ₹ 788.
v) The total of this discount column, on the debit side of the cash book has been added short by ₹ 400.
Solution:
Rectification of Errors

Question 14.
Rectify the following Errors
A Book keeper found his trial balance not balanced, placed the difference amount in the suspense account and subsequently found the following errors
a) Sales book was over cast by ₹ 1,500
b) ₹ 2900 received from Vani in full settlement of her account of ₹ 3,000 was posted in cash book but omitted to be entered in her account.
c) The total of the sales book ₹ 12,000 was debited to sales return accounts.
d) ₹ 1,000 received as interest was credited to interest as ₹ 100 Give rectifying entries and show the suspense account.
Solution:
Rectification of Errors

Suspense Account