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Effect of Rectification of Error on profit

A purchase of $25 has been posted from day book to ledger as $250 .
Sir will you say how it affects the profit?

asked Jan 17, 2016 in Rectification of Errors by Sankari Dkshith B (99 points) 383 views

1 Answer

0 votes
In the purchase book all the credit purchases of goods in which the business deal are recorded.  Periodical total of purchases is posted to the debit side of the Purchase A/c.  From the purchase book each individual supplier's account (creditor) is credited.  In this question the creditor's account will be credited by $250 instead of $25, hence an extra credit of Rs.225 to the supplier.  It will not impact the profit or loss of the business in any way.
answered Jan 17, 2016 by jbsclasses (3,971 points)
Sir will there be no change in the purchases a/c?

Date

                 Particulars

Invoice No.

  L.F.

Details

   (Rs.)

Amount

   (Rs.)

 2013

Aug 04

 

 

 

Aug 10

 

 

 

 

Aug 12

M/s Neema Electronics

20 Mini size TV @Rs.2000 per pc.

15 Tape Recorders @Rs.12500 per pc.

 

Less Trade Discount @ 20%

3250

 

 

 

 

8260

 

 

 

 

4256

 

 

40000

187500

 

 

 

 

182000

 

 

 

 

 

 

31050

   

25

 

227500

45500

M/s Pawan Electronics

10 Video Cassettes @ Rs.150 per pc.

20 Tape Recorders @ Rs.1650 per pc.

 

Less Trade Discount @ 10@

 

1500

33000

34500

3450

M/s Northern Electronics

1 5 GB Pen Drive

 

25

 

Debit Purchase A/c

 

 

 

213075

In the above example Rs.213075 will be posted to the Purchase A/c.  This means Purchase A/c is debited with correct amount.  If while posting to the account of M/s Northern Electronics, you post Rs.250 instead of Rs.25, it will mean excess credit to them amounting to Rs.225.  Since Purchase A/c is debited properly, profit and loss a/c will not be affected.

Thank you sir
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