The undermentioned errors were discovered in the books of Marco after the Profit and Loss Account had been prepared for the year ended 31st March, 1998. The difference in Trial Balance was carried to Suspense Account in the Balance Sheet. Marco provided depreciation on Machinery at 10% p.a. and on Furniture at 5% p.a. A Reserve for Bad Debt was provided at 2% on outstanding debtors. No profit for the year was transferred to Capital Account. (a) A cheque received for $. 8,000 from a customer was not posted to ledger. The corresponding Sales Invoice was for $. 12,000 which had been wrongly passed through the Sales Day Book as $. 2,000. (b) A machinery purchased for $. 20,000 on 1st April, 1997, was wrongly debited to Furniture Account. (c) Sales included $. 25,000 for goods sold for cash on behalf of Moshe. Marco was entitled to a commission of 10% on sales plus expenses for which no adjustment was made. His trade expenses included $. 1,500 as selling expenses in connection with the above sale. (d) Some old Furniture (book value on April 1, 1997, $. 6,000) was disposed of for $. 3,000 on September 30, 1997, but the proceeds has been wrongly credited to Sales Account. (e) A credit sale for $. 5,000 had been passed twice through the Sales Day Book. Giver entries to rectify the above.
The undermentioned errors were discovered in the books of Marco after the Profit and Loss Account had been prepared for the year ended 31st March, 1998. The difference in Trial Balance was carried to Suspense Account in the Balance Sheet. Marco provided depreciation on Machinery at 10% p.a. and on Furniture at 5% p.a. A Reserve for Bad Debt was provided at 2% on outstanding debtors. No profit for the year was transferred to Capital Account. (a) A cheque received for $. 8,000 from a customer was not posted to ledger. The corresponding Sales Invoice was for $. 12,000 which had been wrongly passed through the Sales Day Book as $. 2,000. (b) A machinery purchased for $. 20,000 on 1st April, 1997, was wrongly debited to Furniture Account. (c) Sales included $. 25,000 for goods sold for cash on behalf of Moshe. Marco was entitled to a commission of 10% on sales plus expenses for which no adjustment was made. His trade expenses included $. 1,500 as selling expenses in connection with the above sale. (d) Some old Furniture (book value on April 1, 1997, $. 6,000) was disposed of for $. 3,000 on September 30, 1997, but the proceeds has been wrongly credited to Sales Account. (e) A credit sale for $. 5,000 had been passed twice through the Sales Day Book. Giver entries to rectify the above.
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:The undermentioned errors were discovered in the books of Marco after the Profit and Loss Account
had been prepared for the year ended 31st March, 1998. The difference in Trial Balance was carried to
Suspense Account in the Balance Sheet. Marco provided depreciation on Machinery at 10% p.a. and on
Furniture at 5% p.a. A Reserve for Bad Debt was provided at 2% on outstanding debtors. No profit for
the year was transferred to Capital Account.
(a) A cheque received for $. 8,000 from a customer was not posted to ledger. The corresponding
Sales Invoice was for $. 12,000 which had been wrongly passed through the Sales Day Book as $.
2,000.
(b) A machinery purchased for $. 20,000 on 1st April, 1997, was wrongly debited to Furniture
Account.
(c) Sales included $. 25,000 for goods sold for cash on behalf of Moshe. Marco was entitled to a
commission of 10% on sales plus expenses for which no adjustment was made. His trade expenses
included $. 1,500 as selling expenses in connection with the above sale.
(d) Some old Furniture (book value on April 1, 1997, $. 6,000) was disposed of for $. 3,000 on
September 30, 1997, but the proceeds has been wrongly credited to Sales Account.
(e) A credit sale for $. 5,000 had been passed twice through the Sales Day Book.
Giver entries to rectify the above.
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