PRC-1 · Chapter 8 · Question 57 of 100
An amount of Rs. 200 written off as bad debt in a previous year was received from Faryal and was credited to Faryal’s personal account. The rectification of this error will:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Increase net profit by Rs. 200
Explanation
Bad debt recovered should be credited to an income account (Bad Debts Recovered). By crediting the personal account, income was understated. Rectifying it adds 200 to income, increasing net profit.
More Correction of Errors MCQs
- Q59A bad debt of Rs. 600 previously written off was recovered. The accountant recorded the entry by debiting Cash/Bank and wrongly credited…
- Q60A bad debt of Rs. 500 was written off by debiting 'Bad and Doubtful Debts Expense' but instead of crediting 'Receivables,' the accountant…
- Q61Closing inventory includes an item valued at cost of Rs. 10,000. The net realizable value of this item is Rs. 8,000. The entity uses a…
- Q62Closing inventory includes an item valued at cost of Rs. 12,000. The net realizable value of this item is Rs. 14,000. The entity uses a…
- Q63Adeel Limited (AL) uses the perpetual inventory method. For which of the following transactions does AL need to Debit Cost of Sales and…