Rectification of Errors - MCQs
1. What is the primary objective of rectifying accounting errors?
a) To avoid penalties from tax authorities.
b) To ensure the financial statements present a true and fair view.
c) To improve cash flow management.
d) To increase profitability.
Answer: b
2. Which type of error is not disclosed by a trial balance?
a) Errors of omission.
b) Errors of commission.
c) Compensating errors.
d) Errors of principle.
Answer: c
3. What is an 'error of omission'?
a) An error where a transaction is recorded more than once.
b) An error where a transaction is recorded in the wrong account.
c) An error where a transaction is completely omitted from the books.
d) An error where a transaction is recorded with the wrong amount.
Answer: c
4. How is an 'error of commission' typically rectified?
a) By recording the transaction in the correct account and amount.
b) By omitting the transaction.
c) By adjusting the trial balance.
d) By transferring the error to a suspense account.
Answer: a
5. What is a 'compensating error'?
a) An error where one mistake cancels out another mistake.
b) An error where a transaction is recorded in the wrong account.
c) An error where a transaction is completely omitted from the books.
d) An error where a transaction is recorded with the wrong amount.
Answer: a
6. Which of the following is an example of an 'error of principle'?
a) Recording revenue expenditure as capital expenditure.
b) Recording a transaction in the wrong account.
c) Omission of a transaction.
d) Recording the wrong amount for a transaction.
Answer: a
7. How is an error in the trial balance typically rectified?
a) By adjusting the suspense account.
b) By preparing a new trial balance.
c) By ignoring the error.
d) By recalculating the balances.
Answer: a
8. What is the purpose of a suspense account?
a) To temporarily hold entries that are incomplete or unclear.
b) To record transactions permanently.
c) To adjust cash flow.
d) To store profits.
Answer: a
9. How is an 'error of original entry' typically rectified?
a) By recording the correct entry in the correct account.
b) By reversing the incorrect entry and recording the correct one.
c) By adjusting the suspense account.
d) By ignoring the error.
Answer: b
10. What is the effect of not rectifying errors in the financial statements?
a) The financial statements will always be accurate.
b) The financial statements may not present a true and fair view.
c) The financial statements will be more profitable.
d) There will be no impact on the financial statements.
Answer: b
