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The correct answer is b), as a debit to Accounts Receivable Account was inadvertently posted to the credit of Accounts Payable Account and hence as a result, the credit column balance of Adjusted Trial Balance (ATB) exceeded as compare to debit column balance, so there is a shortage in the debit column balance with the exact amount credited in credit column balance of Adjusted Trial Balance. For example, a debit of $500 to Accounts Receivable Account is wrongly credited in Accounts Payable Account creates $500 deficiency on debit column balance and an increase in credit column balance of ATB due to which it does not balance and shows error which must be corrected by debited accounts payable account and added the amount to accounts receivable account. So, in this case ATB did not agree and it is detected or shown by ATB.

The correct answer is “False”, as the Source Documents (e.g., Invoices, Receipts, Memos, etc.) are firstly connected with Subsidiary journals and then connected with Ledgers of an entity. The first Step of Accounting Cycle is the Source Documents where evidences about Business Transactions are collected and recorded and then these transactions are journalized in Subsidiary Journals and afterwards balance of accounts are (posted) transferred to concerned ledgers. For example, if a sole proprietor (Mr. A) sold goods worth $200 to customer, Mr. B on account, then it is a sales transaction supported by source document i.e., sales receipts for evidence. This transaction is recorded in Subsidiary Sales Journal and then transferred to Sales Ledder and Accounts Receivable Ledger Accounts. So, source documents are indirectly connected with ledger of an entity i.e., there is a bridge (Subsidiary Journal) between source document and ledger in order to be connected.aicle

Retained Earnings can be calculated when the values of assets and liabilities are given by using Accounting Equation as shown below: Assets  =  Liabilities  + Equity Equity = Assets – Liabilities After finding equity, we can find Retained Earnings by applying following formula (derived from Statement Of Changes In Equity ) as shown below: Retained Earnings  =  Equity - (Share Capital + Share Premium + Common Stock) + Transfer to Capital Reserves Example: From the balance sheet of ABC company, the company has assets of $5,000,000 and liabilities $250,000. Share premium is $300. Calculate RE. First of all, we need the value of equity then we can compute RE easily as shown below: Equity =  $5,000,000 - $250,000 = $4,750,000 RE = $4,750,000 - $300 = $4,749,700

The correct option is A), as the Statement of Retained Earnings include Net Income (Loss) for the current accounting period, Opening Retained Earnings (from previous year), Dividend paid to shareholders / stockholders and Retained Earnings at the end of the period. Net Income for the year is added to Opening RE while net loss for the year is deducted from opening RE. Dividend paid is deducted from opening RE to calculate closing Retained Earnings for the current year. The calculated value of RE is the amount of profit remained in the business and can be utilized for different purposes such as for functioning business activities, for example, financing a company’s project or purchasing expensive assets, etc. RE is used to grow the business. However, Retained loss indicates that the company has not enough money to reinvest and has debts which has not been paid during the current accounting period.

The correct choices are (A) Error of Complete Omission and (D) Compensatory Error. In compensating error, the effect of one error compensates the effect of another error and hence the debit column and credit column equalizes while in case of error of complete omission, the complete omission of journal entry or a missing entry does not affect the Trial Balance as both aspects of a Transaction are not recorded in the T-Accounts and as a result, the debit and credit columns of trial balance are agreed. Wrong totalling of accounts and wrong balancing of accounts are easily detectable by preparing trial balance as the T-Accounts are not equalized and as a result the equality of debit and credit columns can not be achieved in trial balance i.e., arithmetic accuracy of debits and credits are easily identified by trial balance.

The correct options are c and d, as Net Income or Net Loss for the period is transferred to Statement of Retained Earnings and then the ending or closing balance of retained earnings account is shown on Balance Sheet / Statement of Financial Position on a particular date. Income Statement or Statement of Comprehensive Income consists of Temporary Accounts which include Revenues and Expenses accounts. The revenues are matched with relevant expenses during the accounting period according to Matching Principle. Excess of revenues over expenses resulted in Net Income or Net Profit while the excess of expenses over revenues shows Net Loss for the period. After preparing Income Statement, the net income or loss is needed in the statement of retained earnings in order to find out ending retained earnings or retained loss which is shown on balance sheet that consists of Permanent Accounts such as Assets, Liabilities and Equity. In this way, Financial Statements are interconnected ...

When the customer (who previously purchased the computer or laptop) is not satisfied with the quality of the Computer Or Laptop Purchased , he returned it to PC company or corporation. If he purchased computer on account / credit, then the following entry is recorded from the points of view of buyer's business as shown below:       Accounts Payable a/c  XXX                                        Purchase Return & Allowances a/c  XXX (Computer Returned To Company Due To Unsatisfactory Condition) We debit accounts payable account, as now the company is no longer be the creditor of the customer and credit purchase returns and allowances equal to the amount of computer purchased. But, if the PC is purchased for cash / bank, then the following entry is recorded as shown below:                     ...

A Trial Balance (TB) should be agreed otherwise, there are one or more errors which must be solved by applying important steps which are mentioned below: 1. Check the arithmetic accuracy of ledger’s balances in debit and credit columns of Trial Balance such as checking the sum of debit and credit columns, checking whether the correct amounts of different ledger’ account balances are transferred or not, etc. 2. Examine the debit and credit balances of different accounts and see whether these balances either debit or credit are entered in the right columns of trial balance i.e., debit balance should be recorded in the debit column and credit balance of account should be enter in the credit column. 3. Examine that the correct amounts are transferred from the journal entries. 4. Recalculate the balances of all account again i.e., in case of debit balance, totaled the sum of debit side and then deduct any credit amount from such sum value to calculate debit balance again. 5. Verify ...

When a Cheque / Check is lost or stolen it is a loss for the company. In that case, the company must inform the bank to stop payment on that cheque in order to avoid unauthorized use of it and loss to the company so that the company will use another cheque to make payments to creditors / suppliers / vendors. The journal entry to record is shown below:                                                Loss On Cheque a/c  XXX                                                                                  Cash a/c  XXX                                      ...

Here, we record the Rectification Entry to get the correct results before the preparation of Trial Balance . When the cheque / check received by proprietor / sole owner from Mr. A ( Accounts Receivable / Sundry Debtor ) of Rs. 4000 and deposited into business' bank account, then from the business points of view, we record the following correct entry as shown below: Correct Entry              Bank a/c  4000                             Mr. A a/c  4000                                                                 (Cash Received From Mr. A And Deposited Into Bank) But, when the proprietor directly received the cash from the customer, Mr. A, but deposited into his personal bank account, then from the point...