Correction of Errors Quiz
12 multiple-choice questions with answers and explanations · 1 easy, 5 medium, 6 hard
Errors of principle, commission, omission and transposition, which errors a trial balance reveals, the suspense account, and the effect of corrections on profit.
- 1Suspense Account: When Is It Opened?A suspense account is opened when:medium
- 2Types of Accounting Errors: Error of PrincipleThe purchase of a delivery van is debited to Motor Expenses. This is an error of:medium
- 3Types of Accounting Errors: Compensating ErrorsThe Sales account is overcast by $300 and, by coincidence, the Wages account is also overcast by $300. This is:medium
- 4Correcting an Error Through the Suspense AccountA rent payment of $460 was correctly credited to Cash but debited to Rent as $640. The entry to correct the error is:hard
- 5Effect of Correcting Errors on Draft Net ProfitDraft profit is $30,000. Three errors are found: a sales invoice for $1,200 was omitted; drawings of $800 were debited to Wages; closing inventory was overstated by $500. What is the corrected profit?hard
- 6What a Balanced Trial Balance ProvesIf a trial balance agrees (total debits = total credits), it proves that:easy
- 7Inventory Error — Overstated Ending InventoryIf ending inventory is overstated by $5,000 at year-end, the current year's financial statements show:medium
- 8A Transposition Error and the Trial BalanceA company recorded a $2,000 cash payment for utilities by debiting Utilities Expense $2,000 and crediting Cash $200 (a transposition error). This error will cause the trial balance to be out of balance by:medium
- 9Prior-Period Error — Books ClosedA material expense of last year was never recorded, and last year's books are closed. Under IAS 8 the correction is recognized:hard
- 10Suspense Accounts — Which Error Escapes?Which of the following errors would NOT be revealed by a trial balance imbalance (and therefore never enters a suspense account)?hard
- 11Bank Reconciliation — A Book ErrorA check correctly written and cleared for $450 to pay a supplier was recorded in the cash ledger as $540. In the bank reconciliation, the $90 difference is:hard
- 12A Self-Correcting Inventory Error Over Two PeriodsAn error overstating ending inventory by $5,000 in Year 1 is never corrected. Assuming no other errors, by the END of Year 2 (with Year 2 itself correctly counted), cumulative retained earnings will be:hard