Furniture purchased from M/s Rao Furnishigs for ₹ 8,000 was entered into the purchases book. This is the error of ... State the wrong entry recorded in the book of accounts. Correct effect should have been: The rectification entry will be:
This is the error of Principle.
State the wrong entry recorded in the book of accounts:
| Purchases A/c | Dr. | 8,000 |
|---|---|---|
| To M/s Rao Furnishigs A/c | 8,000 |
Correct effect should have been:
| Furniture A/c | Dr. | 8,000 |
|---|---|---|
| To M/s Rao Furnishigs A/c | 8,000 |
The rectification entry will be:
| Furniture A/c | Dr. | 8,000 |
|---|---|---|
| To Purchases A/c | 8,000 |
Explanation
The context identifies this scenario (Question 2 under 'Test Your Understanding - II') and similar scenarios (Q14a, Q15a) where furniture or machinery is wrongly recorded in the purchases book. Treating the purchase of an asset (Furniture) as a trade purchase (expense/trading good) violates accounting principles. The rectification logic derived from the text shows that the incorrect debit to Purchases must be reversed (credited), and the correct account (Furniture) must be debited.
Solution Steps
Step 1: Identify the nature of the error. The purchase of furniture (asset) was wrongly treated as a purchase of goods, hence recorded in the Purchases Book instead of the Journal Proper. This is an error of Principle.
Step 2: Determine the wrong entry. Since it was entered in the Purchases book, the Purchases Account was debited and the supplier (M/s Rao Furnishigs) was credited.
Step 3: Determine the correct entry. The furniture is an asset, so the Furniture Account should have been debited. The supplier was correctly credited, so that side remains unchanged.
Step 4: Pass the rectification entry. To correct this, debit Furniture A/c (to record the asset) and credit Purchases A/c (to cancel the wrong debit).