Question

Goods costing Rs.10,000 distributed as free sample were not recorded. The error will result in

• A. is an error of Commission
• B. Will affect the Trial Balance
• C. will not effect the Net Profit
• D. None of these

Answer 1

The correct option is D None of these

When any transaction is not recorded in the books, it is known as error of omission. Error of omission is when any transaction is not recorded in the books at all, or recorded in journal but omitted in ledger accounts. Here both debit and credit entry is missing, and thus this transaction has no effect on the trial balance.

Here the amount of goods distributed is deducted from the purchases account balance because goods are going out of the business.

This will affect the net profit because increase or decrease in value of purchase account balance affects the gross profit, which in turn affects the net profit.