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Rectification of Errors

The document outlines the types of accounting errors that can occur during the recording and classification stages, categorizing them into errors affecting and not affecting the trial balance. It discusses various types of errors, including errors of principle, omission, and commission, and explains methods for rectification based on the timing of detection. Additionally, it describes the use of suspense accounts for temporarily placing discrepancies and provides examples of rectification entries for different error types.

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kandykhrisha
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45 views28 pages

Rectification of Errors

The document outlines the types of accounting errors that can occur during the recording and classification stages, categorizing them into errors affecting and not affecting the trial balance. It discusses various types of errors, including errors of principle, omission, and commission, and explains methods for rectification based on the timing of detection. Additionally, it describes the use of suspense accounts for temporarily placing discrepancies and provides examples of rectification entries for different error types.

Uploaded by

kandykhrisha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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RECTIFICATION OF

ERRORS
Trial Balance(Verifies the arithmetical accuracy)
may not Agree/tally

Because of some errors committed while


recording/Classification stage

Errors are unintentional mistakes

The trail may agree ( even after some errors)


as some does not affect the trial balance
Errors can be of Two Types

Errors affecting the Trial Balance

Errors Doesn’t affecting the Trial Balance


Types of Errors (Sides/Impact Point of View)

Single Sided Errors Double sided Errors

Error with only one Errors with both the


Side(Dr/Cr) of sides
Entry
Do not affect
Affect Trial Balance Trial Balance
Errors of Principle
( Rules, Concepts)
Compensatory
Errors of Errors

ErrorsOmission
of
Commission
ERRORS OF
PRINCIPLE
Transaction in contravention of accounting
principles

Error in recognizing Capital/Revenue


Transactions

Does not affect the Trial Balance


Wages for construction of building, debited to
wages A/c

Purchase of Fixed Asset debited to


Purchases A/c

Regular repairs of building, debited to


Building A/C
ERRORS OF OMISSION
Not considering a transaction

Full Omission Partial Omission

Both Aspects(Dr/Cr) Entry not posted

During Recording During


(not entered in Journal at all)
Posting
Not affect the Trial Balance Affect the Trial
Balance.
ERRORS OF
COMMISSION
Silly mistakes because of carelessness

Errors may relate to a wrong amount,


Correct amount in Wrong Account/Side

While Journalizing, Ledger posting , Casting,


Balancing or Carry forwarding

May/ may not affect the Trial Balance


Generally these affect Trial Balance
Effect of errors is cancelled

The second error compensate the impact of the


first error

Do not affect the Trial Balance


Rectification method depends on the Timing of
detection of an error

Before After Final Accounts


Trail Balance (in next period)
After
Trial Balance
(Before Final
Accounts)
Double sided Errors- Rectified by a
Rectifying Journal Entry

Single Sided Errors

Suspense A/c P&L Adj. A/c


(After Tr. Bal.) (Next Period)
Narration/
Rectification statement
Without Suspense
A/c (before Tr. Bal.)
WHAT IS A SUSPENSE
ACCOUNT
A suspense account is the account to which the amount
being the difference in trial balance is temporarily placed.

If the total of debit side of suspense account is short, it will


show debit balance and if the total of credit side of
suspense account is short, it will show credit balance.

This account is used for rectifying all one-sided errors.


Two sided errors are never rectified by Suspense Account.

It is applicable for rectifying the errors before preparation


of final accounts.
Sales Book is Undercast by ₹1,500

If after Tr. Bal.


Journal Entry : Debit : Suspense
A/c
C
redit : Sales A/c

If detected before Tr. Bal.

Cr. Side (Sales A/c)-Undercasting of Sales book – ₹


1,500
1. ₹ 250 written off as depreciation on Machinery
has not been debited to Depreciation Account

2. Goods purchased of ₹ 300 have bee posted to


the debit of Supplier X.

3. Purchase of ₹ 67 has been posted to the


Trade Payables Account as ₹ 60.
Pass the wrong entry

Reverse the Wrong Entry

Pass the correct entry

Pass the Rectification entry (comparing


the second & third Entry).
The purchase of machinery for ₹ 2,000 has been entered in
the purchases book
Wrong Entry:
Purchases Account Dr. 2,000
To Trade Payable

2,000
Reverse Entry:
Trade Payable Dr. 2,000
To Purchases Account

2,000
Correct Entry:
Machinery Account Dr. 2,000
To Trade Payable

2,000
Rectifications done through
“ P&L Adjustment A/c/Prior Period Items A/c
(Error’s ultimate effect on P&L A/c is considered)”

Wages of ₹ 2,500 paid for the installation of


machinery charged to wages account(detected
next year)
Rectification entry
Machinery Account Dr. 2,500
To Profit and Loss Adjustment Account 2,500
Q.1. Errors of commission do not permit

Correct totalling of the balance sheet

Correct totalling of the trial balance

The trial balance to agree

None of the above

C
Q.2. If depreciation is excess charged by ₹ 500 and
closing stock is understated by ₹ 500, the net profit
will be _ due to these errors
Understated by ₹ 500

Understated by ₹1000

Overstated by ₹ 1000

No effect

B
Q.3. Sale of old furniture is erroneously entered in sales
book. Rectification entry will be:

Debit Sales A/c, Credit Furniture A/c

Debit Furniture A/c, Credit Sales A/c

Debit Debtor A/c, Credit Furniture A/c

Debit Sales A/c, Credit Debtor A/c

A
Q.4. Which of the following errors will affect the trial
balance?
Repairs to building wrongly debited to Building A/c

Total of Purchase Journal by ` 1,000 short

Freight paid on new machinery debited to Freight

A/c

None of the three


Q.5. In case trial balance does not agree, difference is put
to
Suspense A/c

Drawing A/c

Capital A/c

Trading A/c

A
Q.6. On purchases of old furniture, the amount spent on
its repair should be debited to
Repair A/c

Furniture A/c

Cash

A/c Bank

A/c
Q.7. Goods worth ₹ 272 returned by Lala passed
through the books as ₹ 722. The rectification entry is
–
Lala will be debited by ₹ 450

Lala will be debited by ₹ 272

Lala will be credited by ₹ 722

Lala will be credited by ₹ 272

A
Q.8. Commission paid to Mr. Dixit ₹ 225 was posted twice to
Commission account. The rectification is done by –
Writing 'Error in Posting' ₹ 225 on credit side of Mr. Dixit A/c in
Ledger

Passing a rectification entry in Journal Proper crediting


Commission A/c by ₹ 225

Writing 'Error in Posting' ₹ 225 on credit side of Commission


A/c
in Ledger

Passing a rectification entry in Journal Proper


debiting Commission A/c by ₹ 225

C
Q.9. Rectification of which types of errors
requires opening of suspense A/c.

Errors of principle

Complete omission

Partial omission

Errors of commission

C
Q.10 ₹ 51000 received from Mohan but credited to Sohan
A/c. This is an error of .
Errors of principle

O mission

Commission

Compensating

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