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Purchase of cycle was debited to conveyance a/c 3000. Fixed asset to be deprecated at 10%. A credit purchase of 2500 entered as sales. What will be the effect on capital a/c. Ans is : debited by 2300 plz explain?
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Purchase of cycle was debited to conveyance a/c 3000. Fixed asset to b...
Effect on Capital Account due to Accounting Errors

Debiting of Conveyance Account for Purchase of Cycle
- The purchase of a cycle was debited to conveyance account for Rs. 3000.
- This is an accounting error as conveyance account is meant for expenses related to transportation, not for the purchase of fixed assets like a cycle.
- As a result, the capital account will be understated by Rs. 3000 as the purchase of cycle will not be reflected in the books of accounts.

Depreciation of Fixed Asset at 10%
- The fixed asset (cycle) is to be depreciated at 10%.
- Depreciation is a non-cash expense that reduces the value of the fixed asset over its useful life.
- As a result of depreciation, the value of the cycle will be reduced by Rs. 300 (10% of Rs. 3000) and this will be charged to the profit and loss account.
- The capital account will also be reduced by Rs. 300 as a result of this non-cash expense.

Credit Purchase of Rs. 2500 entered as Sales
- A credit purchase of Rs. 2500 was entered as sales.
- This is also an accounting error as sales account is meant to record revenue from the sale of goods or services, not for recording purchases.
- As a result, the capital account will be overstated by Rs. 2500 as the actual purchase will not be reflected in the books of accounts.

Effect on Capital Account
- Due to the above accounting errors, the capital account will be debited by Rs. 2300 (Rs. 3000 - Rs. 300 - Rs. 2500).
- The capital account represents the owner's equity in the business and any error affecting it will impact the true financial position of the business.
- Therefore, it is important to identify and rectify such errors to ensure accurate financial reporting.
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Purchase of cycle was debited to conveyance a/c 3000. Fixed asset to b...
3000 .......Debit in p&L a/c but no record 10% depreciation in p&L a/c.depreciation= 3000*10/100=300 therefore total loss 3000-300=2700 , therefore after rectification 2700 become profit .And sales 2500 credited in p&L a/c ,therefore cancel this effect become 2500 debit in p&L a/c and again add 2500 in debit side of p&L a/c for purchases, therefore total loss is 2500+2500=5000 . therefore loss=2700-5000=2300 . net loss become less from capital, therefore 2300 will be debit
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Purchase of cycle was debited to conveyance a/c 3000. Fixed asset to be deprecated at 10%. A credit purchase of 2500 entered as sales. What will be the effect on capital a/c. Ans is : debited by 2300 plz explain?
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