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Correction Of Errors Quiz 1 (30 MCQs)

This multiple-choice question set evaluates the understanding of correction methods in accounting, including identifying and correcting errors in financial statements, journal entries, and double-entry bookkeeping principles. It covers skills such as account reconciliation, error cancellation, and the application of accounting principles.

Quiz Instructions

Select an option to see the correct answer instantly.

1. Transaction entered in wrong account but same class

Explanations: An error of original entry (Option A) refers to mistakes made when recording transactions initially, such as entering a transaction in the wrong account but within the same account class. This directly matches the scenario described where a transaction was entered incorrectly but still under the correct account category.

Option Analysis:

Option A: Error of original entry - Correct for recording transactions in wrong accounts but same class.
Option B: Error of commission - Incorrect, as it pertains to mistakes made by a clerk or bookkeeper during the process of recording entries, not necessarily entering them incorrectly from the start.
Option C: Error of principle - Incorrect, as this involves errors in applying accounting principles, not in the initial entry itself.
Option D: Error of omission - Incorrect, as it refers to failing to record a transaction at all, not entering it incorrectly.

2. The suspense account is used when:

Explanations: The suspense account is used when trial balance totals do not agree, indicating an error that has yet to be identified and corrected in the accounting records.

Option Analysis:

Option A: Irrelevant as a suspense account is only needed if there are discrepancies.
Option B: Incorrect since errors would have been corrected by this point, no need for a suspense account.
Option C: Preparing financial statements does not inherently require the use of a suspense account unless there is an error first.
Option D: Correct as it indicates uncorrected errors leading to trial balance disagreement, necessitating the use of a suspense account for further investigation and correction.

3. Drawings of goods by Nick for personal use, RM 200 had not been recorded in the books.

Explanations: The claimed correct answer is B) Error Of Omission. This type of error occurs when a transaction has not been recorded in the books, as in this case where Nick's drawings for personal use amounting to RM 200 were not recorded. It directly fits the definition of an omission.

Option Analysis:

Option A: Error Of Commission - This refers to a mistake made by someone who is supposed to record transactions, such as incorrectly recording a transaction.
Option B: Error Of Omission - Correct. The transaction was simply not recorded at all.
Option C: All the above - Incorrect because only one type of error fits this scenario: omission.
Option D: None of the above - Incorrect as an appropriate option (B) exists for this situation.

4. Both discount allowed and discounts received were overcast by $ 57

Explanations: Compensating errors occur when a mistake is corrected by another error, effectively canceling each other out. In this case, both "discount allowed" and "discounts received" being overcast by $57 indicate an error that has been corrected by another error of the same amount, resulting in no net effect on the financial statements.

Option Analysis:

Option A: Correct. Both errors cancel each other out.
Option B: Incorrect. This refers to the fundamental principle underlying accounting entries, not an error correction scenario.
Option C: Incorrect. Omission means a mistake where something is left out entirely, which does not apply here.
Option D: Incorrect. Reversal implies correcting an error by making the opposite entry, but in this case, both errors are of equal magnitude and opposite nature, effectively canceling each other out without needing to reverse them.

5. Which of the following statement is incorrect

Explanations: Errors of wrong totaling do affect the trial balance as they involve arithmetic mistakes in posting or summarizing ledger accounts, which are directly reflected in the totals of debits and credits.

Option Analysis:

Option A: True. The trial balance is used to check for arithmetical accuracy.
Option B: False. Errors of wrong totaling do affect the trial balance.
Option C: True. Double-sided errors can be corrected with or without a suspense account.
Option D: True. Errors of commission may not always impact the agreement of the trial balance depending on their nature and effect.

6. State the effect on Profit for the Year:Omission of Drawings by cheque £100

Explanations: The omission of drawings by cheque £100 does not affect the profit for the year because drawings are a personal withdrawal from the business and do not impact the financial statements used to calculate profit, which is based on the business's revenues and expenses.

Option Analysis:

Option A: Incorrect. Omissions in drawings do not increase profit.
Option B: Incorrect. Omissions in drawings do not decrease profit.
Option C: Correct. Omissions in drawings have no effect on the profit for the year as they are personal transactions and not business expenses or revenues.
Option D: Incorrect. Option C is correct.

7. Which one of the following would result in a trial balance not balancing?

Explanations: Debiting both the cash and sales account to record a cash sale (Option B) would result in an imbalance because it creates a double debit, which violates the basic accounting principle of having one debit and one credit for each transaction. This error will cause the trial balance not to balance as the total debits will exceed the total credits.

Option Analysis:

Option A: A casting error in the sales day book might affect accuracy but generally wouldn't prevent a balanced trial balance if corrected.
Option C: Failure to record a transaction would result in missing entries on both sides, potentially balancing out or not depending on the nature of the transaction.
Option D: Debiting the purchase of a motor vehicle correctly to the purchases account and crediting cash would be properly recorded, maintaining balance.

8. State the type of error taking place in each of the scenarios (7-9) below:The Coach is in business trading goods on credit and Shakib is one of the trade receivables. The following errors were discovered in the books of the Coach:A cash payment of office expenses £600 by The Coach had been entered into the debit side of Shakib account.

Explanations: The error described is when a transaction was recorded incorrectly, leading to an imbalance in the accounts. Specifically, office expenses were debited to Shakib's account instead of being credited as an expense. This indicates that the fundamental nature of the accounting entry was wrong, hence it is classified as an Error of Principle .

Option Analysis:

Option A: Error of commission refers to a mistake made by someone who has prepared or posted accounts but does not affect the principle of recording. Not applicable here.
Option B: Error of omission is when an entry should have been recorded, but was not. This scenario involves an incorrect entry rather than something missing.
Option C: Error of principle means that a fundamental accounting concept or rule has been violated in the recording process. Correct answer as it describes the situation accurately.
Option D: Error of original entry is when there's an error in posting to the ledger from the journal, but the journal entry itself was correct. Not applicable here since the journal entry was incorrect.

9. Repairs of motor vehicles RM 100 was posted to the wrong side of Motor Vehicles Expenses account .Correct the above error.

Explanations: The correct answer is C) Dr Motor Vehicles Expenses RM 200Cr Suspense RM 200. To correct the error, we need to reverse the incorrect posting and then record the correct amount. The original entry posted RM 100 on the wrong side of the account (Credit instead of Debit). Therefore, we first debit Suspense Account to reverse the incorrect Credit and credit Motor Vehicles Expenses to correct the posting. Since the error was for RM 100, both accounts need to be adjusted by RM 200 to balance the transaction.

Option Analysis:

Option A: Incorrect as it credits Suspense instead of debiting.
Option B: Incorrect as it only corrects for RM 100, not balancing the transaction properly.
Option C: Correct as it debits Motor Vehicles Expenses and credits Suspense by RM 200 to balance the transaction.
Option D: Incorrect as it debits Motor Vehicles Expenses instead of correcting the posting fully with Suspense.

10. ..... IA AN ENTRY WHICH HAS BEEN POSTED TO A WRONG ACCOUNT OF THE SAME CATEGORY.

Explanations: An error of commission occurs when a transaction is posted to the wrong account within the same category, such as posting an expense to the wrong expense account. This fits the scenario described in the question where an entry has been posted to a wrong account of the same category.

Option Analysis:

Option A: Error of omission refers to failing to record a transaction at all, not posting it incorrectly.
Option B: Error of principle involves using incorrect accounting principles or methods, which is not the case here.
Option C: Correct. This describes the situation where an entry has been posted to the wrong account within the same category.
Option D: Error of original entry refers to errors in the initial recording of a transaction, which is not applicable here as the error lies in posting rather than recording.

11. What type of error has occurred when payment of $ 87 for advertising entered in both accounts as $ 78?

Explanations: The error described, where $87 is entered as $78 in both accounts, falls under the category of an original entry error. This type of error occurs during the initial recording of a transaction, leading to incorrect figures being posted in both the debit and credit sides.

Option Analysis:

Option A: Compensating errors are those that cancel each other out without affecting the trial balance.
Option B: Commission errors relate to calculation mistakes, such as incorrect percentages or rates applied in transactions.
Option C: Correct. Original entry errors involve mistakes made during the initial recording of a transaction.
Option D: Principle is not an error type but refers to the main idea or concept behind financial entries.

12. An error of principle occurs when:

Explanations: A transaction is recorded in the wrong type of account refers to an error where a financial event is incorrectly categorized, such as recording a sale as an expense instead of revenue. This misclassification directly affects the accuracy and usefulness of financial statements by distorting accounts like income, expenses, assets, or liabilities.

Option Analysis:

Option A: Correctly identifies an error where transactions are not recorded in their proper accounting categories.
Option B: Describes a situation where errors cancel each other out, which is known as a compensating error and does not directly misclassify the nature of the transaction.
Option C: An omission means that a transaction was not recorded at all, leading to an incomplete record but not misclassifying it.
Option D: A debit posted as a credit is a specific type of error where the direction of the entry is reversed, affecting the balance but not necessarily the account type.

13. Repairs of office equipment was debited to the office equipment account.What type of error is it?

Explanations: The error in debiting repairs of office equipment to the office equipment account instead of an expense account (such as Maintenance and Repair) is classified as an Error of Principle . This type of error involves a fundamental misunderstanding or incorrect application of accounting principles, specifically regarding where expenses should be recorded.

Option Analysis:

Option A: Error of omission - Incorrect. This would involve failing to record a transaction at all.
Option B: Error of principle - Correct. The error lies in the incorrect application of accounting principles regarding where expenses should be recorded.
Option C: Error of commission - Incorrect. This involves an accidental or unintentional mistake, such as posting to the wrong account but with correct amounts and principles.
Option D: Compensating error - Incorrect. This type of error involves a mistake that is offset by another mistake in the same transaction, resulting in no net effect on financial statements.

14. A cheque payment of RM 4, 000 for rent was recorded as RM 40, 000 in the books.

Explanations: The claimed correct answer is B) Error of Original Entry because the error occurred when recording the transaction initially, where the amount was incorrectly entered as RM 40, 000 instead of RM 4, 000. This type of mistake happens during the first entry into the accounting records.

Option Analysis:

Option A: Reversal Error - Not applicable here; no transaction was reversed.
Option B: Error of Original Entry - Correct, as it involves an initial recording mistake.
Option C: All the above - Incorrect since only one type of error fits this scenario.
Option D: None of the above - Incorrect because Option B is correct.

15. An insurance payment, RM 600, was correctly debited to the bank account but was posted to the salaries account by mistake.

Explanations: An error of commission occurs when a transaction is recorded in the wrong account, but the amount and nature of the transaction are correct. In this case, the insurance payment was correctly debited to the bank account but mistakenly posted to the salaries account. This fits the definition of an error of commission.

Option Analysis:

Option A: Error of principle refers to recording a transaction in the wrong type of account due to misunderstanding accounting principles, which is not applicable here.
Option B: Correct as explained above.
Option C: Not all errors apply; only error of commission fits the scenario.
Option D: None of the above is incorrect since option B correctly identifies the error type.

16. Rent account has been under casted by $ 200 also commission received account under casted by $ 200. what is the rectification entry?

Explanations: The claimed correct answer is B) Dr:Rent $200Cr:Commission Received $200 because the accounts were undercasted, meaning they have less than their actual amounts. To rectify this, we need to increase Rent and decrease Commission Received by the same amount of $200. This ensures both accounts are adjusted correctly.

Option Analysis:

Option A: Incorrect as it reverses the direction needed for the adjustment.
Option B: Correct as it properly increases Rent and decreases Commission Received by $200 each.
Option C: Incorrect as it involves Cash, which is not related to the undercasting issue in these accounts.
Option D: Incorrect as it incorrectly combines Rent and Cash without addressing both undercasted accounts properly.

17. State the effect on Profit for the Year:Bank Charges of £25 correctly entered in the Bank Account had not been posted to the ledger.

Explanations: The bank charges of £25, correctly entered in the Bank Account but not posted to the ledger, will cause a discrepancy between the books and the actual financial position. This unposted transaction means that the company's records do not reflect this expense, leading to an overstatement of profit for the year.

Option Analysis:

Option A: Incorrect as it suggests an increase in profit which is not the case.
Option B: Correct. The unposted bank charges will result in a decrease in profit because this expense has been incurred but not recorded, leading to higher profits than actually earned.
Option C: Incorrect as it suggests no effect on profit which is false due to the unrecorded expense.
Option D: Incorrect as there is a correct answer among the options provided.

18. Choose if the sentence is correct:He is more cleverer than l

Explanations: The sentence "He is more cleverer than l" contains an error in the use of the comparative form of the adjective "clever." The correct form should be "more clever," not "more cleverer." Therefore, the claim that the correct answer is B) False is accurate.

Option Analysis:

Option A: Incorrect. The sentence is not grammatically correct.
Option B: Correct. The sentence contains an error in the comparative form of "clever."
Option C: Incorrect. All options do not apply as only one is correct.
Option D: Incorrect. There is a clear correct answer.

19. Transaction entered in the opposite side of both the accounts

Explanations: When a transaction is entered in the opposite side of both accounts, it means that the entries are reversed in both the debit and credit columns. This results in an equal but opposite error on both sides of the ledger, making the trial balance appear correct even though the transactions are incorrect.

Option Analysis:

Option A: Error of principle refers to a fundamental mistake in accounting concepts or principles. This is not applicable here as the transaction is correctly recorded but in reverse.
Option B: Error of original entry involves an incorrect amount, date, or account being entered initially. While this could be related, it does not fully capture the essence of recording a transaction on both sides incorrectly.
Option C: Complete reversal of entry is correct because it describes exactly what happens when a transaction is recorded in opposite accounts, leading to an equal but incorrect posting.
Option D: Error of commission refers to a mistake made by someone who prepares the accounting records. This could be related but does not specifically describe the nature of the error as accurately as "Complete reversal of entry."

20. The amount of 500, 000 KHR for the maintenance of the factory machine wasdebited to the plant and machinery account after crediting bank account withsame amount. Which error has been committed?

Explanations: The claimed correct answer is D) Error of principle because the transaction debited the plant and machinery account instead of a maintenance expense account, which violates the fundamental accounting principle that expenses should be recorded in their respective accounts rather than being incorrectly allocated to asset accounts.

Option Analysis:

Option A: Error of commission refers to an error made by a person due to carelessness or mistake. This does not fit as it is more about the process, not the principle.
Option B: Error of omission means failing to record a transaction at all. Here, the transaction was recorded but incorrectly.
Option C: Error of original entry refers to an error in recording the transaction initially. While there is an error, it's not about the initial entry but the principle behind it.
Option D: Correctly identifies that the fundamental accounting principle was violated by incorrectly debiting a maintenance expense to the plant and machinery account.

21. Sales of £450 worth of goods to Shakib had been entered in error into the account of Sameer. Choose the journal entry needed to correct the errors.

Explanations: The correct answer is C) Shakib £450 DR, Sameer £450 CR. This journal entry reverses the incorrect posting of sales to Sameer's account and correctly records it in Shakib’s account. The debit to Shakib increases his liability or asset (depending on context), while the credit to Sameer decreases his liability or asset.

Option Analysis:

Option A: Incorrect as it does not correct the error by reversing the posting.
Option B: Incorrect as it involves an incorrect amount and does not reverse the error.
Option C: Correct as it reverses the error by debiting Shakib's account and crediting Sameer’s account with the correct amount of £450.
Option D: Incorrect as it involves an unnecessary expense account and does not address the sales posting error.

22. State the effect on Profit for the Year:A credit note received from B Brown had been correctly entered in the Purchase Returns Account as £55 but had been entered in Brown's account as £5

Explanations: The claimed correct answer is C) No Effect because the error in recording the credit note amount does not impact the overall profit for the year. The Purchase Returns Account and Brown's account are adjusted differently, but their net effect on the financial statements remains unchanged.

Option Analysis:

Option A: Incorrect as the error does not increase profit.
Option B: Incorrect as the error does not decrease profit.
Option C: Correct, no net effect on profit for the year due to offsetting errors in different accounts.
Option D: Not applicable since option C is correct.

23. Cash sales $ 450 were debited to the bank column of the cash book. what type of error is this?

Explanations: The error described is when an amount that should have been recorded as a credit in the cash book (as it represents cash received) was incorrectly recorded as a debit to the bank column. This indicates a misunderstanding of the basic accounting principle where debits and credits must be correctly applied according to the nature of the transaction.

Option Analysis:

Option A: Error of Omission - Not applicable, as the entry was made but incorrectly.
Option B: Error of Principle - Correct. The error lies in misunderstanding how cash received should be recorded (credit vs debit).
Option C: Complete Reversal Entry - Not applicable, as only one side is incorrect, not the entire entry.
Option D: Error of Commission - Not relevant here; it refers to clerical mistakes rather than principle errors.

24. Cash balance of $ 2000 was omitted in trial balance

Explanations: The correct answer is B) No debit entry Cr. Suspense account $ 2000. This option correctly identifies that the cash balance of $2000 was omitted in the trial balance, and thus should be recorded as a credit to the suspense account to rectify the error. The suspense account is used for such unrecorded transactions until they can be properly identified and corrected.

Option Analysis:

Option A: Incorrect because it debits cash which would not balance the omission of an asset.
Option B: Correct as explained above.
Option C: Incorrect because it incorrectly credits cash and debits suspense, which does not correct the omitted balance.
Option D: Incorrect as option B is valid.

25. Payment by cheque to Agotha of $ 103 was completely missed out

Explanations: The claimed correct answer is D) Omission. This term refers to the failure to include an entry in the accounting records, which accurately describes the situation where payment by cheque to Agotha of $103 was completely missed out.

Option Analysis:

Option A: Principle - Not related to missing entries.
Option B: Reversal - Involves correcting an error, not the initial omission.
Option C: Compensating - Adjusting for errors in a different account, not applicable here.
Option D: Omission - Correctly identifies the missing entry issue.

26. Which of the following error(s) will create suspense account?

Explanations: Suspense accounts are used to record temporary discrepancies until the errors are identified and corrected. The purchase day book overcast (Option A) indicates an error in recording transactions, which would require a suspense account for further investigation.

Option Analysis:

Option A: Correct. An overcast entry in the purchase day book suggests a transaction was not recorded properly and needs to be investigated through a suspense account.
Option B: Incorrect. Overcasting a sale invoice would typically affect revenue accounts, not requiring a suspense account for such an error.
Option C: Incorrect. An overcast closing inventory figure might indicate a stocktaking issue but is usually corrected directly without using a suspense account.
Option D: Incorrect. Over-providing allowance for doubtful debts affects the provision account and bad debt expense, not requiring a suspense account for this error.

27. Purchases of goods on credit for $ 112 from Thea were entered by mistake in the account of Tina

Explanations: The correct answer is D) Comission. A commission error occurs when a transaction is recorded in the wrong account, leading to an incorrect posting of financial information. In this case, purchases made on credit for Thea were mistakenly entered under Tina's account instead of Thea’s.

Option Analysis:

Option A: Principle - This refers to a basic truth or rule and does not describe the type of error in accounting.
Option B: Reversal - This involves correcting an incorrect entry by making another entry that cancels out the mistake, which is not applicable here as no correction has been made yet.
Option C: Omission - This means a transaction was not recorded at all, but in this scenario, the transaction was incorrectly recorded.
Option D: Comission - This correctly identifies that an entry was made by mistake in the wrong account.

28. Insurance paid in cash for $ 52 was entered in both accounts as $ 43

Explanations: The claimed correct answer is A) Original entry. This option refers to the initial incorrect accounting entry where $52 was recorded as $43, which directly describes the error in the original record.

Option Analysis:

Option A: The original entry that contained the error of recording $52 as $43.
Option B: Commission is not related to correcting an accounting error.
Option C: Reversal would imply a correction made in the opposite direction, which does not apply here.
Option D: Compensating entry typically refers to adjusting entries that correct errors without directly affecting the accounts involved, which is not the case here.

29. A Cheque received from Mathew $ 500 had been entered in the books as $ 400. what type of error is this?

Explanations: This is an error of original entry, where the amount recorded in the books does not match the actual amount received due to a mistake during the initial recording process.

Option Analysis:

Option A: Correct. The cheque was entered as $400 instead of $500, which is an error made while initially entering the transaction.
Option B: Incorrect. Reversal entry refers to correcting a previous entry by making another entry in the opposite direction, not the initial mistake.
Option C: Incorrect. This option has a spelling error and is not a recognized type of accounting error.
Option D: Incorrect. Same as Option C, this option contains a spelling error.

30. ..... IS AN ENTRY WHICH HAS BEEN POSTED TO A WRONG CATEGORY OF ACCOUNT.

Explanations: An error of principle refers to a mistake in the basic classification or nature of an accounting entry, such as posting an entry to the wrong category of account. This directly addresses the scenario where an entry has been posted to the incorrect category.

Option Analysis:

Option A: Error of omission is when an entry should have been made but was not.
Option B: Error of original entry involves a mistake in the amount or nature of the transaction recorded initially.
Option C: Error of commission typically refers to errors due to negligence, such as writing the wrong amount on an invoice.
Option D: Correct. An error of principle is when an entry has been posted to a wrong category of account.

Frequently Asked Questions

What is the purpose of correcting errors in accounting?

The purpose of correcting errors in accounting is to ensure the accuracy and reliability of financial records, which helps in making informed business decisions and maintaining compliance with financial regulations.

How does correction of errors differ from proofreading?

Correction of errors focuses on fixing mistakes in accounting entries, principles, or financial statements that affect the accuracy of financial data. Proofreading, on the other hand, involves checking for grammatical and typographical errors to improve clarity and readability.

Can you explain what correction of original entries means?

Correction of original entries refers to the process of identifying and rectifying errors in the initial accounting records or journal entries before they are posted to the ledger, ensuring that all financial transactions are accurately recorded.

Why is it important to correct errors in double-entry bookkeeping?

Correcting errors in double-entry bookkeeping is crucial because it maintains the balance between debits and credits, ensuring that financial statements accurately reflect the company's financial position and performance.

What are some common types of correction needed in accounting?

Common types of corrections in accounting include errors in original entries, mistakes in posting to the ledger, and discrepancies in financial statements. These corrections help maintain the integrity of financial records.

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