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Trial balance of Mr. X did not agree. He put the difference to suspense account and discovered the following errors :
1. Credit sales to Manas Rs. 16,000 were recorded in the purchases book as Rs. 10,000 and posted to the debit of Manas as Rs. 1,000. (i) Credit the purchases account with Rs. 10,000, (ii) Credit the sales account with Rs. 16,000, (iii) Debit Mana’s account with Rs. 16,000, (iv) Credit the suspense account with Rs. 11,000
a. Only (i), (ii) and (iii)
b. Only (i), (ii) and (iv)
c. Only (i), (iii) and (iv)
d. All (i), (ii), (iii) and (iv)
Ans - d
Credit sales to Manas were wrongly recorded in purchases book (instead of sales book) as Rs. 10,000 and wrongly posted to the debit of Manas debit as Rs. 1,000 while the actual sale was for Rs. 16,000, the rectification entry would be to
Credit the purchases account with Rs. 10,000 to rectify the wrong debit.
Credit the sales account with Rs. 16,000
Debit Mana’s account with the difference to be debited (Rs. 1,000 was already debited) i.e. Rs. 16,000 – Rs. 1,000 = Rs. 15,000
Credit the suspense account with the difference i.e. Rs. 10,000 + Rs. 16,000 – Rs. 15,000 = Rs. 11,000
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2. Furniture purchased from Noor Rs. 6,000 was recorded through purchases book as Rs. 5,000 and posted to the debit of Noor Rs. 2,000. (i) Credit the purchases account with Rs. 5,000, (ii) Credit Noor’s account with Rs. 8,000, (iii) Debit the furniture account with Rs. 6,000, (iv) Debit the suspense account with Rs. 6,000
a. Only (i), (ii) and (iii)
b. Only (i), (ii) and (iv)
c. Only (i), (iii) and (iv)
d. All (i), (ii), (iii) and (iv)
Ans - d
Furniture purchased from Noor was wrongly recorded in the purchases book as Rs. 5,000 and wrongly posted to the debit of Noor as Rs. 2,000 (it should have been credited with Rs. 6,000) while the actual purchase was worth Rs. 6,000, the rectification entry would be to
Credit the purchases account to rectify the wrong debit of Rs. 5,000
Credit Noor’s account with Rs. 2,000 to rectify the wrong debit of Rs. 2,000
Credit Noor’s account with the credit value of 6,000
Debit the furniture account with Rs. 6,000
Debit the suspense account with the difference i.e. Rs. 5,000 + Rs. 8,000 – Rs. 6,000 = Rs. 7,000
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3. Goods returned to Rai Rs. 3,000 recorded through the Sales book as Rs. 1,000. (i) Debit the sales account with Rs. 1,000, (ii) Debit Rai’s account with Rs. 2,000, (iii) Credit returns outward account with Rs. 3,000
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - d
Goods returned were wrongly recorded through the sales book as Rs. 1,000, the rectification entry would be to
Debit the sales account with Rs. 1,000
Debit Rai’s account with the remaining amount (Among Rs. 3,000, Rs. 1,000 is already debited) i.e. Rs. 3,000 – Rs. 1,000 = Rs. 2,000
Credit returns outward account with Rs. 3,000
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4. Old machinery sold for Rs. 2,000 to Maneesh recorded through sales book as Rs. 1,800 and posted to the credit of Manish as Rs. 1,200. (i) Debit Manish’s account with Rs. 3,200, (ii) Debit the sales account Rs. 1,800, (iii) Credit Machinery account with Rs. 2,000, (iv) Credit the suspense account with Rs. 2,000
a. Only (i), (ii) and (iii)
b. Only (i), (ii) and (iv)
c. Only (i), (iii) and (iv)
d. All (i), (ii), (iii) and (iv)
Ans - d
Old machinery sold to Maneesh was wrongly recorded (credited) through the sales book as Rs. 1,800 and posted to the credit of Manish as Rs. 1,200 while the actual worth was Rs. 2,000, the rectification entry would be to
Debit Maneesh’s account with Rs. 1,200 to rectify the wrongly done credit of Rs. 1,200
Debit the sales account Rs. 1,800 to rectify the wrong credit of Rs. 1,800 to the sales account.
Debit Maneesh’s account with Rs. 2,000
Credit Machinery account with Rs. 2,000
Credit the suspense account with the difference i.e. Rs. 1,200 + Rs. 1,800 + Rs. 2,000 – Rs. 2,000 = Rs. 3,000
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5. Total of Returns inwards book Rs. 2,800 posted to Purchase account. (i) Credit the purchases account to rectify the wrong debit of Rs. 2,800, (ii) Debit the Returns Inwards account, (iii) Credit the suspense account with Rs. 2,800
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - a
Total of returns inwards book was wrongly posted to the purchases account, the rectification entry would be to
Credit the purchases account to rectify the wrong debit of Rs. 2,800
Debit the Returns Inwards account
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ABC Ltd. gives the following Balance sheet
Balance Sheet(Rs.)
Equity share capital - 1500000
Reserve fund - 100000
6% Debentures - 300000
Overdraft - 100000
Creditors - 200000
Fixed Assets - 1400000
Stock - 500000
Debtors - 200000
Cash - 100000
You are required to compute
1. Liquid Ratio
a. 0·375
b. 1.5
c. 27.27
d. 100
Ans - b
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2. Solvency Ratio
a. 0·375
b. 1.5
c. 27.27
d. 100
Ans - a
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3. Debt-Equity Ratio
a. 0·375
b. 1.5
c. 27.27
d. 100
Ans - c
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4.Stock of Working Capital Ratio
a. 0·375
b. 1.5
c. 27.27
d. 100
Ans - d
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Solution :
1. b
Liquid Assets = Debtors + Cash
= 2,00,000 + 1,00,000
= 3,00,000
Liquid Liabilities : Creditors = 2,00,000
Liquid Ratio= Liquid Assets / Liquid Liabilities
= 3,00,000 / 2,00,000
= 1.5
2. a
Debt – Equity Ratio = External Equities / Internal Equities
External Equities : All outsiders loan Including current liabilities
3,00,000 + 1,00,000 + 2,00,000 = 6,00,000
Internal Equities : It Includes share holders fund + Reserves
15,00,000 + 1,00,000 = 16,00,000
Debt – Equity Ratio = 600000 / 1600000
= 0·375
3. c
Solvency Ratio = Outside Liabilities / Total Assets
Outside Liabilities = Debenture + Overdraft + Creditors
= 3,00,000 + 1,00,000 + 2,00,000 = 6,00,000
Solvency Ratio = (600000 / 2200000) * 100
= 27.27
4. d
Stock of Working Capital Ratio = Stock / Working Capital
Working Capital = Current Assets – Current Liabilities
= 8,00,000 – 3,00,000 = 5,00,000
Stock of Working Capital Ratio = 500000 / 500000 * 100 = 100……………………………………………………………………………………………………………………………………………
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