Question
What is meant by error of omission? Give any one example.
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Answer
Errors of Omission: If a transaction remains altogether unrecorded either in the Journal or in Subsidiary Books, it will be termed as an error of omission. Such an error will not affect the agreement of a Trial Balance, as neither the transaction has been entered on the debit side of an account nor on the credit side of any other account. For example, suppose goods for ₹ 2,000 have been sold to Ram on credit and the transaction was omitted to be recorded in the books. The omission will not affect the Trial Balance in any way, because neither has it been recorded on the debit side of Ram's account nor on the credit side of sales account.
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Name the books of original entry where the following transactions will be recorded with reasons thereof:
| a | Goods Purchased from Ram Lal ₹ 5,000 on credit. |
| b | Provision for doubtful debts created @ 5% on debtors with book value of ₹ 10,000. |
| c | Defective goods sold to Babita on credit worth ₹ 4,000 were returned by her. |
| d | Purchased furniture on credit from Mr. Ratan Singh for ₹ 15,000 for use in the business. |
Fill up the missing information in the following journal entries:
M/s Ram Narain & Sons of Kerala, who are dealers in readymade garments, purchased the following.
Prepare Purchase Book assuming CGST @ 9% and SGST @ 9%.
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2017
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May 2
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Purchased from Fashion House, Mumbai (Maharashtra)
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| 100 Shirts @ ₹ 1,800 per Shirt | |||
| 75 T-shirts @ ₹ 1,600 per piece | |||
| Less: Trade Discount 20%; and freight charges payable ₹ 10,000. | |||
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May 10
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Purchased from Appolo Garments, Kerala
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| 65 Shirts @ ₹ 2,000 per piece | |||
| 80 T-shirts @ ₹ 1,500 per piece | |||
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May 15
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Less: 20% Trade Discount and freight charges payable ₹ 2,000. | ||
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Purchased from Garden Furniture House, Kolkata
12 Chairs @ ₹ 5,000 per Chair
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May 25
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Purchased from Amitabh Shirts, New Delhi for cash
120 Shirts @ ₹ 1,500 per Shirt
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What is retirement of a bill of exchange?
Name the various books of original entries.
On 31st March, 2015 the Pass Book of Mr. Janaki Dass showed a credit balance of ₹ 20,600. Prepare a Bank Reconciliation Statement from the following information:
- Cheques amounting to ₹ 15,000 were drawn in March 2015, out of which cheques for ₹ 5,500 were presented for payment on 3rd April.
- A cheque for ₹ 5,475 was deposited into the bank, but wrongly entered in the Cash Book as ₹ 5,745.
- A cheque of ₹ 5,000 which was received from a customer was entered in the cash column of the Cash Book in March 2015 but was omitted to be banked in the month of March.
- A B/P of ₹ 10,000 was retired by the bank under a rebate of ₹ 100 but the full amount of the bill was credited in the Cash Book.
- Bank charges entered in the Cash Book twice ₹ 200.
On 31st December, 2014, pass book shows debit balance of ₹ 7,500. From the following particulars, prepare a Bank Reconciliation Statement:
- Cheques paid in for collection amounted to ₹ 20,600 but cheques of ₹ 7,800 were credited on 3rd January, 2015.
- A cheque of ₹ 1,000 debited in cash book was omitted to be banked.
- Cheques of ₹ 7,800 were drawn on 27th December of which cheques of ₹ 2,400 were cashed upto 31st December.
- A cheque of ₹ 800 was banked and credited, but omitted to be recorded in cash book.
- Bank charged interest on Overdraft ₹ 650.
Rectify the following errors found in the books of Mr. Suhail by passing entries:
- One item of purchase of ₹ 250 has been posted from the purchases book to the ledger as ₹ 350.
- Sales return of ₹ 2,000 from a party has not been posted to that account, through the party's account has been credited.
- A cheque of ₹ 600 issued to the suppliers account (shown under Sundry Creditors) toward his dues had been wrongly debited to the purchases account.
- Credit sale of ₹ 1,000 has been credited to the sales and also to the Sundry Debtor's Account.
What will be the effect of the following on the Accounting Equation?
- Harish started business with cash ₹ 18,000
- Purchased goods for Cash ₹ 5,000 and on credit ₹ 2,000
- Sold goods for cash ₹ 4,000 (costing ₹ 2,400)
- Rent paid ₹ 1,000 and rent outstanding ₹ 200
The Trial Balance of M/s. Gupta & Sons shows a difference of ₹ $52,200$. To prepare the Final Account on $31^{st}$ March,$ 2019:$ this difference is placed in a Suspense Account. Afterwards the following errors were disclosed. Pass the necessary entries to rectify them and show the Suspense Account.
→- Purchases Book total had been undercasted by ₹ $20,000.$
- A cheque received from Vasudev for ₹ $7,800$ had been debited in the Cash Book but not posted in Vasudev’s Personal Account.
- Returns Outward Book had been overcasted by ₹ 10,000.
- Goods returned by Yash Pal worth ₹ 15,000 have been entered in Returns Outward Book. However, Yash Pal’s Account is correctly posted.