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What would be the impact on the Trial Balance of each of the following errors?
1. A copy of a sales invoice for Rs. 4,000 is not recorded in the Sales Day Book
a. Excess credit Rs. 4,000
b. Excess credit Rs. 8,000
c. Excess debit Rs. 4,000
d. No impact
Ans - d
If there is no record of a copy invoice in the Sales Day Book then there has been no prime entry. This means that there will be no credit in the Sales account and no debit in a customer’s account. As an Error of Omission there is no impact on the Trial Balance.
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2. A supplier's invoice for Rs. 2,500 is posted to the debit of the Trade Payable's account
a. Excess credit Rs. 2,500
b. Excess credit Rs. 5,000
c. Excess debit Rs. 2,500
d. Excess debit Rs. 5,000
Ans - d
If the supplier’s invoice had not been posted, the debits would have exceeded the credits in the Trial Balance by Rs. 2,500. As the invoice was actually posted to the debit in the supplier’s account the effect is doubled so that the total of the debits will exceed the total of the credits by Rs. 5,000
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3. The daily total of the Sales Day Book is stated as Rs. 345,000 instead of Rs. 315,000 (i.e. overcast by Rs. 30,000).
a. Excess debit Rs. 30,000
b. Excess debit Rs. 60,000
c. Excess credit Rs. 30,000
d. No impact
Ans - c
The total from the Sales Day Book is posted to the credit of the Sales account. The Sales account will be listed in the Trial Balance. If the total transferred from the Sales Day Book is higher than it should be the Trial Balance will show an excess of credits. In this case the excess is Rs. 30,000
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4. A purchase invoice is recorded in the Purchases Day Book as Rs. 18,500, without taking account of 10% of that amount offered as trade discount.
a. Excess credit Rs. 1,850
b. Excess debit Rs. 1,850
c. Excess debit Rs. 3,700
d. No impact
Ans - d
The amount entered in the Purchases Day Book is incorrect as trade discount is never entered in the books. However, it is the incorrect amount that will appear in both the debits in the Purchases account and the credit in the supplier’s account. Although the amount is incorrect because the same amount has been entered as both a debit and a credit there will be no impact on the Trial Balance, i.e. it will continue to be in balance.
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5. A sales invoice for Rs. 21,000 has been posted to the Customer's account as Rs. 12,000.
a. Excess credit Rs. 12,000
b. Excess debit Rs. 12,000
c. Excess credit Rs. 9,000
d. Excess debit Rs. 9,000
Ans - c
The sales invoice will have been posted to the debit of the customer’s account. As the amount is Rs. 9,000 less than the amount that will appear in the Sales account credit balance, it follows that the Trial Balance will show an excess credit of Rs. 9,000
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6. A Credit Note for Rs. 2,400 received from a supplier has been posted to the credit of the supplier's account.
a. Excess credit Rs. 2,400
b. Excess credit Rs. 4,800
c. Excess debit Rs. 2,400
d. Excess debit Rs. 4,800
Ans - b
Credit purchases will have been credited to the supplier’s account. If the supplier sends a Credit Note indicating an amount that does not have to be paid, then there should be a debit to the supplier’s account. If the debit of Rs. 1,200 had not been made then there would be an excess of credits of Rs. 1,200. Because the Rs. 1,200 was actually posted to the wrong side there is a double effect and the credits will exceed the debits by Rs. 2,400
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7. The year-end balance in a Trade Receivable's account has been carried down as Rs. 14,800, instead of Rs. 18,400.
a. Excess debit Rs. 3,600
b. Excess credit Rs. 3,600
c. Excess credit Rs. 7,200
d. No impact
Ans - b
Trade Receivable balances are listed as debits in the Trial Balance. If figures are transposed so that Rs. 18,400 is listed as Rs. 14,800 then the debits are too low and there will be excess credits of Rs. 3,600.
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8. The total of the Returns Outwards Day Book, amounting to Rs. 9,800, has been posted to the debit of the Purchases Returns account.
a. Excess debit Rs. 9,800
b. Excess debit Rs. 19,600
c. Excess credit Rs. 19,600
d. No impact
Ans - b
The total of Returns Outwards should be a credit with the individual debits made in the supplier's account. In this case the Rs. 9,800 returned has been entered on the wrong side, so doubling the effect of the error. This means that there will be an excess of credits of Rs. 19,600
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From the following information, answer the following questions. On 1st June 2018 Mr. Raj started a fast food shop with stock of goods of Rs. 55,000 in Delhi. The following transactions occurred in his business in that month:
Jun-05 - Sold goods to Shahed Rs. 5,000;
Jun-12 - Goods purchased Rs. 12,000;
Jun-20 - Sold goods on credit Rs. 35,500;
Jun-23 - Cash received from Rafi Rs. 5,400;
Jun-28 - Goods returned to seller Rs. 3,400.
1. Which transactions will be recorded in the journal proper of Mr. Raj?
a. Sold goods in cash
b. Sold goods on credit
c. Goods returned to seller
d. Started with stock of goods
Ans - d
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2. In which book the transactions occurred on June 05 and 20 will be recorded?
a. Purchase journal
b. Purchase return journal
c. Sales journal
d. Sales return journal
Ans - c
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3. Mr. Raj will prepare ...... on returning goods
a. Debit note
b. Credit note
c. Debit voucher
d. Credit voucher
Ans - a
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Balance Sheet
Liabilities (Rs.)
Equity shares of Rs. 10 each - 1,00,000
Reserves - 20,000
P.L. A/c - 30,000
Secured loan - 80,000
Sundry creditors - 50,000
Provision for taxation - 20,000
Assets (Rs.)
Goodwill - 60000
Fixed Assets - 140000
Stock - 30000
Sundry Debtors - 30000
Advances - 10000
Cash Balance - 10000
The sales for the year were Rs. 5,60,000.
Calculate the following ratios from the balance sheet given above :
1. Debt – Equity Ratio
a. 0.53
b. 1
c. 1.4
d. 4
Ans - a
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2. Liquidity Ratio
a. 0.53
b. 1
c. 1.4
d. 4
Ans - b
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3. Fixed Assets to Current Assets
a. 0.53
b. 1
c. 1.4
d. 4
Ans - c
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4. Fixed Assets Turnover
a. 0.53
b. 1
c. 1.4
d. 4
Ans - d
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Solution :
1. a
Debt–Equity Ratio = Long–Term Debt / Shareholders Fund
Long–Term Debt = Secured loan = Rs. 80,000
Shareholder’s Fund = Equity Share Capital + Reserves + P.L. A/c
= 1,00,000 + 20,000 + 30,000 = 1,50,000
Debt-Equity Ratio = 80,000 / 1,50,000 = 0.53
2. b
Liquidity Ratio = Liquid Assets / Liquid Liabilities
Liquid Assets = Sundry Debtors + Advances + Cash Balance
30,000 + 10,000 + 30,000
= 70,000
Liquid Liabilities = Provision for Taxation + sundry creditors
= 20,000 + 50,000
= 70,000
Liquid Ratio = 70,000 / 70,000 = 1
3. c
Fixed Assets to Current Assets = Fixed Assets / Current Assets
= 1,40,000/ 100000
= 1.4
4. d
Fixed Assets Turnover = Turnover / Fixed Assets
= 5,60,000 / 1,40,000
= 4
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