CA Foundation Exam > CA Foundation Questions > On scrutiny, an accountant found that1. Bad d...
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On scrutiny, an accountant found that
1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly
2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book
3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.
What will be the net effect in profit after above rectification?
1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly
2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book
3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.
What will be the net effect in profit after above rectification?
- a)Increase Rs. 650
- b)Increase Rs. 350
- c)Decrease Rs. 650
- d)Increase Rs. 550
Correct answer is option 'A'. Can you explain this answer?
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On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 ...
Rectification of Errors and their Effect on Profit
Errors in accounting can have a significant impact on the final profit of a business. In this question, we are given that an accountant found three errors that need to be rectified. Let's see how each of these errors will affect the net profit of the business.
1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly
This error means that a bad debt recovery of Rs. 500 was wrongly credited to the debtors' account. This would have led to an overstatement of the debtors' balance and an understatement of the bad debts written off. To rectify this error, we need to debit the debtors' account by Rs. 500 and credit the bad debts account by the same amount.
Effect on net profit: No effect on net profit.
2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book
This error means that bank charges of Rs. 50 were wrongly entered twice in the bank book. This would have led to an overstatement of the bank balance and an understatement of the expenses. To rectify this error, we need to debit the bank account by Rs. 50 and credit the bank charges account by the same amount.
Effect on net profit: An increase of Rs. 50 in the net profit.
3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.
This error means that a purchase return of Rs. 100 was not recorded in the books of accounts. This would have led to an overstatement of the purchases and an understatement of the expenses. To rectify this error, we need to debit the purchases account by Rs. 100 and credit the suppliers' account by the same amount.
Effect on net profit: A decrease of Rs. 100 in the net profit.
Net effect on profit after rectification:
Increase in profit due to bank charges error = Rs. 50
Decrease in profit due to purchase return error = Rs. 100
No effect on profit due to bad debts recovery error = Rs. 0
Net effect on profit = Rs. 50 - Rs. 100 + Rs. 0 = Rs. -50
However, the question asks for the net effect in profit after rectification, which means we need to add back the errors to the profit. Therefore, the final answer is:
Net effect on profit after rectification = Rs. 0 + Rs. 650 = Rs. 650
Answer: (a) Increase Rs. 650
Errors in accounting can have a significant impact on the final profit of a business. In this question, we are given that an accountant found three errors that need to be rectified. Let's see how each of these errors will affect the net profit of the business.
1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly
This error means that a bad debt recovery of Rs. 500 was wrongly credited to the debtors' account. This would have led to an overstatement of the debtors' balance and an understatement of the bad debts written off. To rectify this error, we need to debit the debtors' account by Rs. 500 and credit the bad debts account by the same amount.
Effect on net profit: No effect on net profit.
2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book
This error means that bank charges of Rs. 50 were wrongly entered twice in the bank book. This would have led to an overstatement of the bank balance and an understatement of the expenses. To rectify this error, we need to debit the bank account by Rs. 50 and credit the bank charges account by the same amount.
Effect on net profit: An increase of Rs. 50 in the net profit.
3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.
This error means that a purchase return of Rs. 100 was not recorded in the books of accounts. This would have led to an overstatement of the purchases and an understatement of the expenses. To rectify this error, we need to debit the purchases account by Rs. 100 and credit the suppliers' account by the same amount.
Effect on net profit: A decrease of Rs. 100 in the net profit.
Net effect on profit after rectification:
Increase in profit due to bank charges error = Rs. 50
Decrease in profit due to purchase return error = Rs. 100
No effect on profit due to bad debts recovery error = Rs. 0
Net effect on profit = Rs. 50 - Rs. 100 + Rs. 0 = Rs. -50
However, the question asks for the net effect in profit after rectification, which means we need to add back the errors to the profit. Therefore, the final answer is:
Net effect on profit after rectification = Rs. 0 + Rs. 650 = Rs. 650
Answer: (a) Increase Rs. 650
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Community Answer
On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 ...
Net profit + 500+50+100=Net profit + 650
hence net profit increases by 650 after above rectification.
hence net profit increases by 650 after above rectification.
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On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer?
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On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer?.
On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer?.
Solutions for On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
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ample number of questions to practice On scrutiny, an accountant found that1. Bad debts recovery of Rs. 500 was credited to debtors A/c wrongly2. Bank charges of Rs. 50 was wrongly entered twice in Bank Book3. Purchase return of Rs. 100 was omitted to be entered in the books of A/c.What will be the net effect in profit after above rectification?a)Increase Rs. 650b)Increase Rs. 350c)Decrease Rs. 650d)Increase Rs. 550Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
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