Basic Accounts Accountancy

ERRORS&THEIR RECTIFICATION

Introduction:
idl balance
is a list of balances of all accounts on a ledger particular
date. Trial dalance is
prepared tO verity the arithmetical accuracy of books of accounts. If the trial balance agrees or tallies, it can
Oe Sald that
recording. posting and balancing
have been done correctly and accurately, but it it does
gree, it can be
concluded that errors mistakes
not
have been committed. These errors willhave to be located
or
d d rectified.
However agreement of trial balance does not mean that the books of accounts are free trom
errors.

Meaning:
rOrS mean mistakes made by an accountant or clerk while recording business transactions in the books
o accounts.Errors may be the result of incorrect accounting knowledge or wrong data collection or wrong
cording of the transaction into the books of accounts or due to incorrect arithmetical calculations.
intentional omission or commission of amount and accounts while recording the transaction is also
known as an error:

Effects of errors:
ome errors affect
the agreement of the trial balance and some do not affect the agreement of the trial
Dalance. Errors
ultimately affect the net profit or net loss and the financial position of the business. In short,
errors aftect the
accuracy and reliability of the books of accounts.

Types of Errors:
All errors whether affecting trial balance or not and at any stage of accounting are broadly classified us
under.

Classification of Errors

Errors of Errors of Errors of Compensating

principle Omission Commission errors

Errors of Principle:

When a transaction is not recorded according to the fundamental

accounting, the error is said to be an error ot
principles of Book keeping and
principle. These errors may relate to
expenditure and income capital and revenue
e.g
1) Wages paid for installations of Machinery debited to
Wages account.
2) Payment of Salaries to Ramesh debited to Ramesh's account.

Errors of Omission:
It is clear from the word
"Omission that transaction is omitted at the time of
recording
in the
original books. Similarly while posting to ledger omission can take
is not affected when place The
agreement trial balance
of
a transaction is not recorded at all in the
credit aspects of transactions
original books because both
debit and
are not considered.
There are two types of errors ot omission:
 Basic Accounts
1) Error of Complete omission: When a transaction totally ignorea or omitted to be
is
Accountano
the original books of accounis, it is an error or
recorded
complete omission. It does not effect the
of trial balance. agreeme
2) Error of partial omission: When the record of a transactions is partly omitted
to be
original books or not posted to one account in the
recorded in
ledger it IS an error ot
partial omission. It affects
the agreement of a trial balance.

e.g: Error of complete omission.

() Goods worth 5.000 purchased from
Deepak have not been recorded in the books.
(1) Sales returns from Rohit R 500 has been omitted to be recorded in
sales return books.

Errors of Commission:
When a transaction recorded has been
wrongly entered in the bookS O1
original entry or
posted in the ledger it is known as error of commission. wrongly
These errors are committed
due to wrong
recording in the original books, wrong posting. wrong
totalling or wrong balancing of the accounts,
wrong calculation and wrong amount etc. These altects the
also called as clerical errors.
agreement of trial baiance. These errors are
Accounting principles are correctiy tollowed but the errors are
in
casting. recording etc. posting,

Compensating errors:
A
Compensating error is one which is counter balanced by any other error or errors. When one or more
debit errors happen to
equal one or more credit errors the error is said to be a
compensating error.
Error affecting and not affecting the Trial Balance:

Errors

A) Errors not affecting the Trial Balance

B) Errors affecting the Trial Balance
(Two Sided errors)
(One Sided errors)
() Complete omissions of transaction
() Partial omission of a transaction
(11) Posting of wrong amount on both
(1) Posting of wrong amount on one
sides of an account
side of an account
(in) Posting to wrong head of account
(11) Posting on wrong side of an account
iv) Compensating errors
Uv) Wrong totaling or balancing
((vi) Recorading of wrong amount in original books ()Omission of balance of account in
Errors of Principles
trial balance
(vi1) Recording twice in original books

A) Errors not affecting the Trial Balance (Two side errors): Even though the trial balance agrees there
may be some errors in the books of accounts. The Agreement of a trial balance does not mean that
accounting is correct because trial balance proves only arithmetical accuracy and not accounting
accuracy. Such errors cannot be disciosed by the trial balance. These errors do not atfect the agreement
of a trial balance.

(i) Complete omission of a transaction: li a particular transaction is not recorded at all in the original
books of accounts. It will not affect the agreement of trial balance. Such error should be rectified by
passing usual journal entry.
EBPurcnased goods worth 3,000 trom Raju stores is not recorded in the books. In this transaction

there are three stages in recording

Stagel-No recording in original books.

/D Edcation Pane
 Basic Accounts Accountancy
S t a g e 2- No posting in the ledger accounts ie. no debit and no credit have been given.
Stage Ihere will be no difference in the trial halance because neither a debit nor a credit
nas deen gIven. The trial balance will agree (tally) in spite of committing an error and thus the

error will not be disclosed by the trial balance.

both sides of an accounts: Sometimes transaction recorded

(ii) Recording of wrong amount on a is

the primary book, however while posting to the two accountsaffected. wrong amount 1s

correctly in
entered to both the account. Such an erTor will not affect the agreement of trial balance.

? 5,000 has been posted ?

8,000
Poona Furniture Ltd. for
as

eg.: Purchase of
furniture on credit from
to Furniture A/c and also to Poona Furniture Ltd. A/c
In the above transaction there are three stages in recording.

S t a g e l -Transaction is recorded correctly in the journa

amount as under
wrong
been made to respective accounts with
Stage 2-Ledger posting has
recorded correctly in the original
transaction is
Sometimes a
head of account
-

to wrong
(iii) Posting of accounts.

books but while posting it to ledger account. posted to the wrong heads
t is
?

from Kulkarní enterprise is posted to the

debit of Building account 7,00o.
e-g: Machinery purchased
three stages as under:
In the above transaction there are
1- Transaction is recorded correctly the journal.
in
Stage Building is wrongly debited
is correctly credited but
a/c

Stage 2 -

Rulkarni Enterprises a/c

instead of Machinery a/c.
error
other
counterbalanced by any
A compensating error is one which is
Errors:
(IV) Compensating is
error

errors. This
to equal one or more credit
more debit errors happen
or e r r o r s . When one or

said to be a compensating error.

of a trial balance.
error does not affect the agreement
Compensating

e.g by R 825
1) Sales Book is overcast

by 825
2) Purchase Book is overcast then
825 Sales b o o k total is

column of sales book is

taken more (overcast) by?
Total of the a m o u n t
Sim1lariy the total of
is more by ? 825.
of sales account. Thus total of credit
side
posted to the credit total i s posted to the
debit
R 825. Purchase book
book is also taken more by
the purchase account/
account. Thus total
of debit is more by 825.
Side of purchase
has been wreng
transactton
This e r r o r occurs when a
books -

amount in the original

(v) Wrong and is subsequently carnied through
to the ledger account
the original books ot
accounts
recorded in
recorled as t 85+ n purchase book.
IS
trom Bhanudas Traders
E.g: Purchased goods 458 on credit
?

ot
to the fundamental prineiple
When a transaction is not recordel according
Error of Principle
-

(vi)
are known as error of priniple
accounting 3,940
to Mau hinery Account Rs.
e.g: Repairs
to Machinery has been charged
book. It is an error of
Tecorted twice in the orighal
When the same Iransau tion is

(vii) Recording twice:

recording t w i c e in the books ol aucounts

t w i e in therash book.
bill t 900 reorded
e.g: Paid electriity

side errors):
B) Errors affecting the trial balance (one
total ot debt side does not agree
a difterence in the totals of trial balance. The
Certain errors bring out
trial balance.
caled as errors atfecting the
are
with the total of credit side
ot the trial balane, Such errors

VD Education Page 3
C1itrak I Dharamshi
 Basic Accounts
One side error or errors affecting ony
Stuch errors are explained as under.
one accmt, tnese errorS affect the
agreement
Accountan
fthe tral
of the trial halan
(i) Partial omission ofa transaction:
When a
transaction in recorded correctly in the original books
posted to one of the of accounts but
ledger accounts. Such error is known
by mistake is ne
one
aspect of transaction is recorded but other
as
partial onission. In order words when
is omitted is called partial
e.g: Cash received 7,500 from Mayank omission.
not posted to
Mayank account.
(i1) Posting of wrong amount to one account: If
from the original books the trial wrong amount posted is to one of the
balance will not agree. ledger accounts

(ii) Posting on the

wrong side of an account: When any transaction
account the trial balance will not is posted on the wrong side of an
agree.
(Iv) Wrong totalling or balancing- Supposing any account in the ledger is
the trial balance will not
agree simply because the total
wrongiy totalled or balanced
Errors of casting, of debit will not be equal to the total of credit.
balancing, carrying forward the balance etc.
eg: The purchase book total
35,930. The error will affect theof the
first page R 35,390 was carried
forward to the next page as
agreement of trial balance.
(V) Omission of balance of an
account in trial balance: Trial balance is a list of
balances taken from debit and credit
various ledger accounts. Sometimes it
omitted to be taken to the may happen that one of the
baliances is
trial balances. This will affect the
total of debit not be agreement of trial balance because the
equal to the of total credit.
If an account
having debit balance is omitted the credit total will be
having credit balance is omitted, greater, similariy it an account
the debit the total will be
greater. 1This error therefore will eifect the
agreement of trial balance.

(vi) Error of double posting to one

account: Sometimes an entry is
books i.e. passed correctly in the original
Journal or subsidiary books but it is posted twice to one account in the ledger by mistake.
Such error causes a difference, in the agreement of trial balance which is disclosed a trial by balance.

llustration 1: (one side errors located before the

preparation of trial balance) Rectify:
1) Credit side of bank overdraft is under cast by 4,500 was not taken in trial balance.
2) Paid remuneration to Kapil, a factory supervisor 9,000 recorded in cash book but is was omitted to
post in ledger book.
3) Credit side of Motor car a/c is overcast by R, 5,500 is not transterred at al.
4) Sold goods to Sumit 3,500 was entered in sales book but was not posted to his personal account.
5) The total of purchase book 8,989 was carried forward as 9,898.
6) Office rent of R 750 paid to Hari was wrongly posted to ollice rent account as 570.
7) Sold old furniture and received ? 3,390 was debited to furniture account, thouglh recorded correctly in
Cash book.
8) Received a crossed cheque from Pravin R4,500 was posted to the debit of Pravin's account.
9) Cash paid to Firoz { 2,150 was posted twice to his æcount.
10) Purchase Return Book was cast shot by R225.

Illustration 2: (Two sided errors or errors affecting two accounts)

Rectily the following errors in the books of Lalit.
) Goods worth R 300 distributed as free samples not recorded in the books.
 Basic Accounts
2) Purchased goods from Mr. Accountancy
Kapil 3,200 are not recorded at all.
3) A crosed cheque of R 960
received from Mr. Mayur dishonored but
4) Goods purchased from Mr. Bharat
was not recorded in cash book.
4,500 was posted to Mr. Bhat's account.
5) Salary ofR
3,900 paid to our employee Mr. Sunit was
debited to his personal account,
6) Purchase of Equity shares from S.R.S Ltd for
7,000. were not recorded.
7) Goods Purchased from Trupti R 7,500 was
recorded in sales books.
8) Paid wages for installation of Machinery 2,800 wrongly debited to wages account.

Illustration 3: [Errors affecting accounts located before the

Pass necessary preparation of trial balance]
journal entries to rectily the following errors.
1) Sales return book was overcast by &500
2) Factory lighting bilR 9,000 paid but recorded twice in the books.
3) Paid rent 725 was
wrongly posted
to rent account as
4) Total of Sales Book was undercast by R 850.
275.

5) Wages paid for extension of building &8,900 was charged to wages account.
6) Cash received trom Manali was recorded on the payment side of cash book * 1,800.
7) Paid carriage for purchase of MachineryR 3,100 was charged to wages account.
8) Lite Insurance of proprietor paid 1,650.

Illustration 4: [Rectification of Errors of Principle]

Pass necessary journal entries to rectity the tollowing errors.
1) An amount of R 3,400 paid for rent was debited to personal account of Mr. Subhash the landlord of the
premises.
2) Life Insurance premium of the proprietor paid R 1,520 was debited to insurance account.
3) Sold old
Computer for 8,900 to Kunal was posted to sales account.
4) Purchased Machinery for 30,000 from Nashik Machinery Ltd was debited to purchase account.
5) Received commission R 375 was posted to interest account.
6) An amount of 5,000 withdrawn by proprietor tor his personal use was debited to Sundry expenses
account.
7) Excess debit has been given to rent account 1,500 and exCess credit has been given to commission
received account R 1,500.

lustration S: [Errors of complete and partial omission

1) Sold goods to Shital Traders worth R 7,200 were not recorded m the bouks of aceounts
2) Purchase of furniture of worth t 6,500 was omitted from the books uf accounts.
3) Paid wages * 11,000 by cheque was not recorded at all.
4) Cash paid to Maya 2,900 though recorded in cash book was not
posted to her personal account.
5) Purchased goods from Sharada Enterprise t 3,300 on credit Was hot posted to their personal account.
6) Short debit has been given to salary account &500 and short credit has been given to imterest received
account 500.

Illustration 6:| Debit balance n Suspense A/e|

Trial balance of Paresh showed a excess (redit of t 1,040 whch was transterred to the debit side of
Suspense account. On serutiny tolltowing errors were located.

Passrectifieatlon
entries
and
repare suspeanse aeeonnt.
1) Purchase return book has been overcast hy & 1,300.
2) Salaries paid B,.500 has been posted to salaries aceount as t 5,800.
3) Credit sales ? 2,500 to Trimukh Enterprise has been debited to their account as 250.
4) Received interest R 4,050 has been posted to interest received account as 5,040.

IL Dharamchi ..
 Basic Accounts
Accountane
5) Paid 8.950 to Manali has been debited to Sonali's account

6) Bad debts recovered R8.200 has not been posted

7) The total of purchase book was overcast by
in cash book.
6,200.

Illustration 7:
A trial balance shows excess debit of 2,800 which was transferred to
Following errors were suspense account.
then located. Rectify them and
prepare Suspense A/c.
1) Salary paid ? 16,000 to Pinal was debited to Pinal's
account.
2) Good purchased of 3,500 form
Ajay were recorded as 35,000 in the purchase book.
3) R 1,600 paid for printing bill was posted to credit side of
printing bill account.
4) Purchased good form Rajesh worth R 7,700 not
posted his account form purchase book
to
5) Freight paid 8,300 was posted twice to freight account
6) Total of purchase book ? 23,000 was posted to
purchase
account as 13,000.
Illustration 8:
(Opening balance of suspense account is not given)
Trial balance of Mahadeo was not
tallied. The difference was transferred to suspence account on
investigation following errors only were located.
1) Loan taken from Bank of Baroda 15.000 was
credited to Mahadeo's Capital account.
2) Detective good returned by Hari of * 390 stands debited to Hari's account.
sales returns book.
Though entered correctly in

3) A credit sale ot * 6,800 to Yadav

traders was not posted from sales book to Yadav Traders account.
4) Ofice Salary includes 1.500 paid for wages to work.
5) Amount due to Govindrao 655 was brought forward as 555
6) Amount due form Krishna R 890 has been writen ott as bad debts but the same was not posted to bad
debts account.

Illustration 9: (Mixed problems)

Rectify the following errors assuming that these errors were located atter the preparation of trial balance.
One sided errors be rectified by using suspense A/C.
1) Audit fees 800 posted as R80.
2) Discount allowed R280 debited twice to discount allowed account
3) Amount of R 3,900 payable to supplier not taken in the list of sundry creditors.
4) Discount received 250 credited twice to discount received account.
5) Cheque issued to Nisha for R 2,200 has been recorded on the receipt side of the cash book in bank
column.
6) Balanceof commission received account 935 was taken twice to trial balance.
7) R1,450 received in respect of bad debts written off previously was credited to party's account.