PRC-1 · Chapter 8 · Question 8 of 100
A bad debt of Rs.500 was written off by debiting 'Bad and Doubtful Debts Expense' but wrongly credited to 'Payables' instead of 'Receivables'. What is the impact of this error on the statement of financial position?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Liabilities are overstated
Explanation
Because 'Payables' (a liability) were wrongly credited, liabilities are falsely inflated (overstated). Concurrently, 'Receivables' were not reduced, so assets are also overstated.
More Correction of Errors MCQs
- Q10Closing 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…
- Q11Goods purchased from supplier worth Rs. 200,000, no entry made in purchases book is an example of:
- Q12Purchase of fuel for the car is capitalised to motor vehicles. It is a type of:
- Q13Interest expense of Rs. 100 has been wrongly debited to stationery expense. What entry is required to correct the error?
- Q14Rent expense of Rs. 200 was paid and correctly recorded in the cash book, but it was credited to the rent expense account. What will be…