SUGGESTED SOLUTION

CA FOUNDATION
SUBJECT- ACCOUNTS

Test Code – CFN 9305

BRANCH - () (Date :)

Head Office : Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666

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ANSWER -1
ANSWER -A

S.No. Debit Credit

(Rs.) (Rs.)
1 Commission A/c Dr. 4,500
To Interest Received 4,500
(Correcting wrong entry of interest received into
commission account)
2 M/s Sobhag Traders A/c Dr. 90
To Suspense A/c 90
(Being credit sale of Rs. 2,760 posted as Rs. 2,670 i.e.
debiting M/s Sobhag Traders A/c less by 90, now
rectified)
3 Drawing A/c Dr. 35,000
To Machinery A/c 35,000
(Correction of wrong debit to machinery account for
purchase of air-conditioner for personal use)
4 Return Inward A/c Dr. 5,000
To Debtors (Personal) A/c 5,000
(Correction of omission to record return of goods by
customers)

(4*1 = 4 MARKS)
ANSWER –B
Journal Entries
Particulars L.F. Dr. (Rs.) Cr. (Rs.)

(i) Subham A/c Dr. 300

Furniture A/c Dr. 2,700
To Nigam A/c 3,000
(ii) Sales Returns A/c Dr. 5,000
To Jyothy A/c 5,000
(iii) Sales A/c Dr. 75,000
To P & L A/c (Gain on sale of 15,000
investments)
To Investments A/c 60,000

(iv) Drawings A/c Dr. 10,000

To Trade Expenses A/c 10,000

(4*1 = 4 MARKS)

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ANSWER -2
ANSWER -A
(i) This is one sided error. Trivedi & Co. account is credited instead of debit.
Amount posted to the wrong side and therefore while rectifying the account,
double the amount (Rs. 800) will be taken.

Before Trial Balance After Trial Balance After Final Accounts

No Entry Trivedi & Co. A/c Dr. 800 Trivedi & Co. A/c Dr. 800
To Suspense A/c 800
Debit Trivedi A/c with To Suspense A/c 800
Rs.800

(ii) Purchase of Rs. 420 is wrongly recorded through sales day book as Rs.240.

Correct Entry Entry Made Wrongly

Purchase A/c Dr. 420 Mantri & Co. Dr. 240

To Mantri & Co. 420 To Sales 240

Rectification Entry
Before Trial Balance After Trial Balance After Final Accounts

Sales A/c Dr. 240 Sales A/c Dr. 240 Profit & Loss Adj. A/c Dr.660
Purchase A/c Dr. 420
Purchase A/c Dr. 420 To Mantri & Co. 660
To Mantri & Co. 660
To Mantri & Co. 660

(6 MARKS)
ANSWER -B
(i) Error of Principle.
(ii) Error of Omission.
(iii) Error of Commission.
(iv) Error of Omission.

(0.5*4 = 2 MARKS)
ANSWER -C
Errors of principle: When a transaction is recorded in contravention of accounting principles,
like treating the purchase of an asset as an expense, it is an error of principle. In this case there
is no effect on the trial balance since the amounts are placed on the correct side, though in a
wrong account. Suppose on the purchase of a typewriter, the office expenses account is
debited; the trial balance will still agree.

(2 MARKS)

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ANSWER -D
The method of correction of error indicated so far is appropriate when the errors have been
located before the end of the accounting period. After the corrections the trial balance will
agree. Sometimes the trial balance is artificially made to agree inspite of errors by opening a
suspense account and putting the difference in the trial balance to the account - the suspense
account will be debited if the total of the credit column in the trial balance exceeds the total of
the debit column; it will be credited in the other case. Each and every error detected can only
be corrected by a complete journal entry. Those errors for which journal entries were not
possible at the earlier stage will now be rectified by a journal entry(s), the difference or the
unknown side is being taken care of by suspense account. Those errors for which entries were
possible even at the first stage will now be rectified in the same way.

(2 MARKS)

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