Explain errors of principle and give two examples with measures t…

Question

Explain errors of principle and give two examples with measures to rectify them.

✓

Answer

The important purposes for the preparation of Trial Balance are explained with the help of the following points.

Ascertaining the arithmetical accuracy: When the total of all debit balance accounts are equal to all credit balance accounts, it is assumed that at least posting from journal to the respective accounts is arithmetically correct.
Summarising the ledger accounts: Trial Balance acts as a consolidated statement, providing a comprehensive list of all the accounts. Thus, a Trial Balance provides a summarised version of each account.
Preparing final accounts: As the Trial Balance provides a summarised version of each account, so different accounts can be directly transferred to Trading, Profit and Loss Account, and Balance Sheet without referring to different ledgers.
Locating and rectifying errors: If the Trial Balance does not agree, it indicates the occurrence of arithmetical error, which can be easily located. However, Trial Balance only helps in locate and rectify arithmetical error and not other types of errors.

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

Total of one page of the Sales Book was carried forward to the next page as ₹ 2,785 instead of ₹ 2,587.
A cheque of ₹ 400 received from Mohan was dishonoured and had been posted to the debit side of the ‘Allowance Account’.
Return of goods worth ₹ 5,000 by a customer was entered in the Purchases Return Book.
Sum of ₹ 200 owed by ‘X’ has been included in the list of Sundry Creditors.
Sale of old furniture worth ₹ 430 was credited to the Sales Account as ₹ 340.

		₹
(a)	Cash Book Balance (Overdraft)	12,500
(b)	Cheques deposited but not recorded in Cash Book	2,000
(c)	Cheque received but not sent to Bank	1,500
(d)	Credit side of the Bank Column has been overcast	60
(e)	Bank charges entered in Pass Book twice	75
(f)	Bills Receivable directly collected by the Bank	4,000
(g)	Deposited cheques returned dishonoured by Bank	1,700
(h)	Electricity Bill paid by Bank as per instruction	800
(i)	Cheques issued but not presented for payment	5,400
(j)	Cheques deposited but not cleared	3,200

2017
Nov. 3	Purchased goods from Sachdeva Furniture Store, New Delhi :
	50 Chairs @ ₹ 2,000 each
	5 Tables @ ₹ 10,000 each
Nov. 10	Purchased furniture from Mahadeva & Co., Jaipur (Rajasthan) valued ₹ 2,00,000, less $12\frac{1}{2}\%$ Trade Discount
Nov. 18	Purchased furniture from Fashion Furniture House, Chandigarh of the list price of ₹ 2,50,000, less 15%
Nov. 20	Purchased from India Furniture House, New Delhi:
Nov. 20	100 Chairs @ ₹ 1,800 each
Nov. 25	Purchased from Mohan Lal & Sons furniture of the value of ₹ 20,000 for cash

2019		₹
April 1	Cash balance ₹ 2,000, bank balance ₹ 24,500
April 2	Cash sales ₹ 60,000 plus CGST and SGST @ 6% each
April 5	Deposited in Bank	50,000
April 7	Issued cheque to Sohan	10,000
April 9	Sold goods for cash ₹ 10,000 plus CGST and SGST @ 6% each
April 12	Received a cheque from National Insurance Co. Ltd. against claim lodged last year	19,800
April 14	Sold goods to Niraj of ₹ 25,000 plus CGST and SGST @ 6% each, received cash ₹ 10,000 and balance by cheque. Allowed him discount ₹ 500
April 16	Purchased furniture for ₹ 10,000 plus CGST and SGST @ 6% each, paid for furniture by cheque
April 18	Sold old furniture for ₹ 10,000 plus CGST and SGST @ 6% each and received cash
April 20	Paid into bank cheque of Niraj and cash	2,500
April 22	Paid to Suman by cheque	2,500
April 26	Suman's cheque returned on technical ground and paid cash for equal amount
April 28	Bank charged its commission of ₹ 300 plus CGST and SGST @ 6% each
April 29	Bank paid insurance premium as per standing instructions	2,500
April 30	Nigam paid into bank directly, intimation received on the same day	5,000

Sold goods to Brijesh of the list price of ₹ 10,000 at trade discount of 5%. Received full payment in cash.
Goods given away as charity ₹ 1,000.
Charge interest on capital of ₹ 5,00,000 @ 7% p.a.
Outstanding wages ₹ 3,000.
₹ 5,000 due from Sunny are now bad debts.
₹ 50,000 cash sales (of goods costing ₹ 40,000).

Sales of goods to Madan ₹ 6,000 were entered in the Sales Book as ₹ 600.
Credit purchase of ₹ 1,500 from Ajay has been wrongly passed through the Sales Book.
Repairs to building ₹ 300 were debited to Building Account.
₹ 2,050 paid to Rohit is posted to the debit of Mohit’s Account as ₹ 5,020.
Purchases Return Book is overcasted by ₹ 400.

2017		₹
April 2	Bought goods of the list price of ₹ 6,000 from Khanna Brothers less 15% trade discount and 2% cash discount and paid 40% price at the same time.
April 3	Received a draft from Mohan in full settlement and deposited it into Bank
April 5	Purchased goods from Suresh of the list price of ₹ 8,000 at 20% trade discount and paid him by cheque.	9,750
April 8	Sold goods and received a cheque	25,000
April 10	Deposited the above cheque into Bank	12,000
April 12	Sohan deposited in our Bank A/c	4,000
April 16	Paid Income Tax by Cheque	5,600
April 20	Received a cheque from Sohan and sent to Bank	7,800
April 20	Discount allowed	200
April 21	Withdrew from Bank−for office	2,000
April 21	for private use	4,000
April 23	Sent a cheque to X in full settlement of his A/c	4,900
April 27	Cheque of Sohan returned by the bank as dishonoured.
April 28	Dinesh was declared insolvent and a payment of 60 paise in a ₹ received from his estate by a Cheque
April 30	Bank allowed Interest	350
	Paid for Rent by cheque	1,500
	Paid for traveling expenses by cheque	500