IGCSE Accounting Paper-2: Specimen Questions with Answers 152 - 153 of 189

Passage

Pihu Jaiswal opened a laptop shop on 1 Jan 2020 with the following assets:

Pihu Jaiswal opened a laptop shop on 1 Jan 2020 Pihu Jaiswal opened a laptop shop on 1 Jan 2020

$

Freehold shop premises

45000

Stock of laptop

10000

Cash (paid into a business bank account)

4000

Pihu obtained a loan of $12000 from her friend, Komal on the same date and paid this into the bank account.

Question number: 152 (2 of 5 Based on Passage) Show Passage

Edit

Short Answer Question▾

Write in Short

Which two of the above errors are of the same type? (Marks 1)

Explanation

Both are errors of commission. Recording transaction in a wrong account or in a right account but with a wrong amount, both are errors of commission.

Error of Commission constitutes the following-

  • Recording wrong amount in books of prime entry

  • Wrong totaling of the books

  • Posting wrong amount in ledger accounts

  • Wrong totaling of the ledger accounts

  • Posting at the wrong side of ledger accounts

Question number: 153 (3 of 5 Based on Passage) Show Passage

Edit

One Liner Question▾

Write in Brief

If error (I) above is not corrected, what are the effects on: (Marks 2)

(I) Polly’s Trading and Profit and Loss Account,

(Marks 2)

Explanation

Purchases will be overstated and it will lead to understatement of the Gross Profit as well as the Net Profit.

In error I, a capital expenditure is treated as a revenue expenditure. When a capital expenditure is treated as a revenue expenditure, two things happen-

  • Profits are understated because of increased revenue expenditure and Assets are also understated because these are only recorded in Trading & Profit & Loss A/c and not in the balance sheet.

  • Depreciation is not charged on the asset purchased.

Choose Paper