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Rectification of Errors That Do Not Influence The Trial Balance

This document discusses rectification of errors in accounting. It explains that rectification of errors is the process of revising mistakes made when recording transactions. Errors are classified as either influencing or not influencing the trial balance. Errors not influencing the trial balance involve mistakes on both sides of debit and credit that can be rectified by a reversing journal entry. Errors influencing the trial balance occur on one side only and require opening a suspense account along with a journal entry. The document provides examples of rectifying different types of errors and classifies errors into omissions, commissions, principles, and compensating.

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23 views

Rectification of Errors That Do Not Influence The Trial Balance

This document discusses rectification of errors in accounting. It explains that rectification of errors is the process of revising mistakes made when recording transactions. Errors are classified as either influencing or not influencing the trial balance. Errors not influencing the trial balance involve mistakes on both sides of debit and credit that can be rectified by a reversing journal entry. Errors influencing the trial balance occur on one side only and require opening a suspense account along with a journal entry. The document provides examples of rectifying different types of errors and classifies errors into omissions, commissions, principles, and compensating.

Uploaded by

aagamjain161515
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Arihant college,Indore

BBA 1st year


Fundamentals of accounting
Rectification of errors
Rectification of errors is referred to as the procedure of revising mistakes made in recording transactions.
These mistakes can occur while posting entries to ledger accounts, classifying accounts, carrying balance
forward, etc.
The errors are broadly classified into two types:

1. Rectification of errors that do not influence the trial balance.


2. Rectification of errors that influence the trial balance.

Rectification of errors that do not influence the trial balance


Rectification of errors that do not influence the trial balance include errors that involve errors on both sides
of debit and credit and can be rectified by passing a journal entry.
These errors impact two accounts simultaneously and are therefore known as two-sided errors. The errors
can occur both on the debit and credit side of the account and need to be corrected or rectified by passing a
journal entry to correct the debit and credit.
An error can be rectified by reversing the impact of wrong entry on debit and credit side and restoring the
correct debit and credit entry.
Whenever there is excess credit or shortage in debit, then debiting the concerned account is done, similarly
when there is shortage of credit and excess of debit, then the concerned account should be credited.
Example
Credit sales to Rajesh of ₹ 5,000 were not recorded in the sales book. Rectify the error.
The rectification of this error will be as follows:
Rajesh’s A/c Dr. 5000
To Sales A/c 5000

Rectification of errors that influence the trial balance


Rectification of errors that influence the trial balance occurs on any one side of the trial balance and such
errors can only be rectified by passing a journal entry along with opening of a suspense account.
Such errors are also known as one sided errors as it impacts only one side of the account (either debit or
credit). Such errors are rectified by adding a note in account or by passing a journal entry by creation of a
Suspense account.
The process of rectification is as follows:

1. Identification of account having error.


2. Determine the shortage or excess in the account.
3. If any difference is created due to excess credit and shortage in debit, then debit the account with
the difference amount as determined earlier.
4. If any difference is due to excess debit and shortage of credit, then credit the account with the
difference.
5. Finally, complete the rectification by debiting or crediting the suspense account.
Example
Depreciation written off on machinery ₹4000 not recorded in Machinery account
Suspense A/c Dr. 4000
To Machinery A/c 4000
(Being rectification towards omission of posting in machinery account)

Types of Rectification of Errors

1. Errors of omission: These errors occur in cases like when the entire
transaction has been omitted from the books of accounts. From the
word ‘omitted’ this error got the name ‘Errors of Omission’. This
normally happens when the transaction is not recorded in the books
of the original entry.

2. Errors of commission: These errors happen due to any wrong


committed by the accountant. Again, from the word ‘commission’
the error got its name as ‘Errors of Commission’. This might happen
due to the wrong balances in an account, wrong posting of other
accounts, the wrong carry-forwards, wrong totalling, etc.

3. Errors of principle: Errors of principle are committed in those cases


where a distinction between the revenue and the capital item is not
differentiated. This is the error of principle when the accountant
denies accepting the principle of common accounting practices.

4. Compensating errors: As indicated by the name, compensating


errors are those errors which naturally compensate each other.

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