IGCSE Accounting Paper-1: Specimen Questions with Answers 225 - 225 of 338

Passage

Avinash’ financial year ends on 31 December. On 31 December 2018, he prepared a trial balance and found an excess of $7600 on the debit side. The difference was credited to the Suspense A/c and later on the following errors were detected-

(I) Sale of Old furniture $1400 were credited to Sales A/c

(II) Purchases book was overcast by $600

(III) Goods returned to Anupam $3000 recorded in Sales Return Book, however Anupam’s A/c was correctly debited

(IV) Bought goods from Aviral $1000 was recorded in Sales book.

However, the same was correctly posted to the credit of Aviral’s A/c.

(V) Installation Cost of Plant $500 debited to Wages A/c

(VI) Capital introduced $1500 had been correctly entered in the cash book but debited in the drawings A/c

Question number: 225 (2 of 2 Based on Passage) Show Passage

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Essay Question▾

Describe in Detail

Complete the following statement to calculate the correct profit for the year. Where an error does not affect the profit, indicate with a tick in the no effect column. (Marks 12)

Avinash

Statement of Correction of Profit for the year ended 31 December 2018

statement to calculate the correct profit for the yearstatement to calculate the correct profit for the year

No Effect

Increase

$

Decrease

$

$

Draft Profit

22000

Error (I)

Error (II)

Error (III)

Error (IV)

Error (V)

Error (VI)

Corrected Profit

Explanation

Avinash

Statement of Correction of Profit for the year ended 31 December 2018

statement to calculate the correct profit for the yearstatement to calculate the correct profit for the year

No Effect

Increase

$

Decrease

$

$

Draft Profit

22000

Error (I)

1400

Error (II)

600

Error (III)

6000

Error (IV)

2000

Error (V)

500

Error (VI)

Image of the Right

Image of the Right

7100

3400

3700

Corrected Profit

25700

  • Error I- Sales A/c was wrongly credited instead of Furniture A/c. The profit was increased by the increased sales, so it needs to be decreased.

  • Error II- Overcast of Purchase Book had previously reduced the profits. The correction would increase the profits.

  • Error III- Excess Sales Returns had decreased profits. The correction would increase the profits.

  • Error IV- Increased Sales (by $1000) and reduced purchases (by $1000) had wrongly increased the profits by $2000. So, the profits need to be reduced by $2000.

  • Error V- Wages A/c was wrongly debited instead of Plant A/c. Wages being a revenue expenditure reduces profits. So, the profits need to be increased.

  • Error VI- Neither capital nor drawings are recorded in P&L A/c. So, it had not affected the profits.

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