QUESTION ONE
A) TYPES OF ERRORS
An error can be defined as an unintentional mistake or misrepresentation in the books of accounts or records either by way of:
i) Clerical or mathematical mistake in record or data
ii) Oversight or misrepresentation of facts
iii) Misapplication of accounting policies
Errors can be broadly classified as:
i) ERRORS OF PRINCIPLE
ii) ERRORS OF OMMISSION
iii) ERRORS OF COMMISSION.
iv) ERRORS OF DUPLICATION
v) COMPENSATING ERRORS
B) DISTINCTION BETWEEN INCOME AND EXPENDITUREAND PROFIT&LOSS A/C
INCOME AND EXPENDITURE ACCOUNT PROFIT &LOSS ACCOUNT
? It is prepared by charitable organizations e.g church which are run not for profit
? Its credit balance is known as surplus or excess of income over expenditure
? Its debit balance is known as deficit
? Surplus or deficit revealed by it is transferred to capital fund.
? It is prepared by concerns run for earning a profit
? Its credit balance is known as net profit
? Its debit balance is known as net loss
? Net profit or loss disclosed by it is transferred to capital account in the case of sole proprietorship.
C) DISTINCTION BETWEEN TRADE AND CASH DISCOUNTS
TRADE DISCOUNT CASH DISCOUNT
? Its allowed to encourage buyers to buy goods in large quantities
? It’s a reduction in the list price granted by the supplier either because of a trade practice or for purchases exceeding a certain quantity
? Its allowed at the time of purchase
? Its shown as a deduction in the invoice
? In the ledger, there is no trade discount account. ? It is allowed to encourage the buyers of goods to make payments at an early date
? It is a reduction in the amount payable for payment within a certain period.
? It is allowed at the time of payment of the purchase
? It doesn’t appear in the invoice
? Cash discount account is maintained in the ledger
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