CHAPTER 8

OTypes of Errors -- On the basis of nature, On the

basis of inherent effects
O Effects of Errors on Trial Balance
O Rectification of Errors--Suggested Guidelines
DMustrations
DExercise.
Rectification of
Errors

When transactions are recorded, some mistakes or errors may creep into the book keeping. These are
either clericalerrors or errors related to accounting principles. These may occur at the timeof recording
the transactions in the subsidiary books or at the time of posting journal entries into the ledger accounts.
Some of these errors will affect the agreement of the trial balance and some others will not.
Wherever an error occurs, whatever may be its type or whether it affects the Trial Balance,
it should be rectified through proper Rectification. Otherwise the books of accounts cannot
exhibit the true and correct view of the affairs of a business. The errors may be detected
(1) Before preparation of the Trial Balance; (2) After preparation of the Trial Balance but
before preparation of the Final Accounts and (3) After preparation of the Final Accounts.
The Rectification should be guided by (a) the nature and effect of the errors and (b) the
Doint of time at which the errors have been detected.
yPES OF ERRORS
TA. On the basis of nature
1. Error of Omission : It results from a complete or partial omission of recording a
transaction. A particular transaction may be totally omitted to be entered in the journal.
As a result there will be no corresponding posting in the Ledger also. It is a case of
complete omission. Again a transaction may be recorded in the subsidiary book but
omitted to be posted to any one of the ledger accounts. It is a case of partial omission.
A complete omission will not affect the agreement of the Trial Balance.
2. Error of Commission : It arises from an act of commission likeentries wrongly made in
Journal or Ledger. There may be error ofposting, error of casting,entering wrong amounts,
entering atransaction in awrong subsidiary book, ete. Unless the effects of commissions
counter balance each other, the agreement of the Trial Balance becomes affected.
3. Error of Principle: Where the basic principles of accounting are wrongly applied,
an Error of Principle is committed. The main reason behind such an error is
incorrect classification of capital and revenue items. For example, Purchase of an
Asset may be passed through the Purchase Day Book or wages paid for installing
a machine may be debited to Wages Account. This may also arise due to incorrect
application of provisions or reserves. Usually this error does not affect the
agreement of the Trial Balance. But the operational results beconme misrepresented.
4. Compensating Errors : More than one error may occur in such a manner that the
effect of one is neutralized by that of other/others. These do not affect the
agreement of the Trial Balance.

247
248 () Financial Accounting - I
B. On the basis of inherent effects
1. One Sided Erro:When the effect of an error falls on one account, it is called
one sided error. It may arise due to (i) wrong casting of any Day Book; (11) Posting
made to the wrOng side of the relevant account; (iii) Duplicate posting of the same
amount, etc. This error causes a disagreement of the Trial Balance.
2. More than one sided Error:The error may be,
(i) two sided error affecting two accounts at the same time and not affecting the agreement
of the Trial Balance, for example, Ram Account credited instead of Rahim Account,
(ii) two sided error affecting two accounts but at the opposite direction andinsteadaffecting
the agreement of the Trial Balance, for example, Ram Account debited of
Rahim Account being credited etc.
(iii) more than two-sided error : affecting more than twO accounts simultaneously.
 252 () Flnanclal Accounting -I
Jástration 2.
Rectifications afier of
The Trial Balance Kumar asbut
S. Balance
Trial before preparation of Final Accounts.
on 31.12.|995 did not agree and the diftercnce was transferred

Suspense Account.
() The totaltheof following
Subsequcntly Salcs detccted
of the were
one page erors Day Book: was carried forward to the next page as 4,513 Instea

of 4.531.
undercast by 400.
(ii) The total of the Purchase Day Book was
150 eceived from a creditor was debited to Discount Account.
(11) A Cash discount of debited to Motor Vehicles Account.
l,450 spent on repairs of Delivery Van was of N. Ghosh in the Sales Ledger
300 received from M. Ghosh was debited to the Account books at all.
t Goods worth 700 returmed by Islam was not entered in the
[C.U. B. Com. 1993 -
(vii))?211 interest on overdraft was credited to Interest Account.
Adapted
Solution:
Books of S. Kumar
Journal Dr.
Cr.
Particulars L.F. Amount
Date
1995
Amount
Dr. 18
31.12. () Suspense AWc
To Sales Alc 18
(Sales Account undercredited, now rectified]
(îi) Purchase A/c Dr. 400
To Suspense A/c 400
Total of Purchase Day Book undercast by 400, now rectified]
(i) Suspense Alc Dr. 300
31.
To Discount (Allowed) Alc 150
To Discount Received Alc 150
[Cash discount of 150 received from a creditor wrongly debited to Dis
cOunt Account, nowW rectified]
(iv) Repairs Alc Dr. 1,450
To Motor Vehicles Alc 1,450
(Amount spent on repair of Delivery Van wrongly debited to Motor Vehicles
Account, now rectified]
(v) Suspense Alc Dr. 600
To M. Ghosh Ac (Debtors) 300
» N. Ghosh Ac (Debtors) 300
R 300 received from M. Ghosh debited to N. Ghosh Account,
now rectified]
(vi) Retun Inward Alc
Dr. 700
To Islam Alc 700
(Retum lnward from Islam omitted to be recorded, now
entered])
(vii) Interest on Overdraft Alc
Dr. 211
Interest (Received) Alc...
To Suspense Alc Dr. 211
422
[lnterest on overdraft 211 wrongly credited to Interest
Account, now rectified)
Vorking Notes
Entrywise discussion
() When the page total was
carried
remained undercredited by ? 18. It isforward,
noW
4,531 4,513 = 18 was extended less. As a result
Sales AC
(i) Due to credited.
undercasting
of the Purchase Day Book, 400 was posted less now
debited. to the debit of Purchase Alc. It is

Contd. nextpag
 Rectiflcatlon of Errors () 253
in) Discount Received A/C IS Credited as it should have been credited. Discount Alc was
nAW reversed. Assumed that the entry in Party Alc wrongly debited. So t IS
was correctly made.
fv) The correct entry should be-- Repairs Alc.... .Dr.
To Cash
The wrong entry has been- Motor Vehicles .Dr. Repairs now debited and Motor Vehicles credited.
To Cash
M Ghosh Alc is credited as it should have been credited. N
Ghosh Alc was wronaly debited. So it is now reversed.
i) The correct entry totally omitted is recorded now.
i Interest on Overdraft A/c is debited as it should
have been debited. nterest Alc was wrongly credited. It iS now
reversed.

Illustration 3.
Sinilar to previous illustration.
The Trial Balance of M. Pvt. Ltd showed a difference on
or2 with the help of a Suspense Account. The 31.12.1995 and the Trial Balance was made to
following errors were detected afterwards :
(a) The Sales Day Book was overcast by 3,000 (b) \A sum of
oredited to B. Bose; (c) A creditor's balance was ektrated as 1.345 L,000 received from R. Bose was wrongly
instead of 345 (d) A sales Bill for
#0289 was wrongly debited to Customer's Account as 9,810: (e) The
#1000: (O An invoice of ? 2,000 for the Purchase of a Purchase Day Book was overcast by
Pass
Typewriter was debited to Purchase A/c.
Journal entries to rectify the above errors.
[B. U. B. Com. Adapted]
Solution:
Books of M. Pvt. Ltd.
Journal Dr. Cr.
Date Particulars L.F. Amount Amount
1995
31.12. (a) Sales Alc Dr 3,000
To Suspense Alc
[Sales Day Book overcast by 3000, now rectified) 3,000

(b) B. Bose Alc. .......

Dr
To R. Bose Alc 1,000
(Amount received from R. Bose but wrongly credited to B. Bose, now rectified] 1,000
(c) Sundry Creditors Ac ...

Dr 1,000
To Suspense Alc
[A creditor's balance over extracted, now rectified] 1,000
(d) Suspense Alc.. .Dr. 521
To Sundry Debtors Alc 521
(Amount debited in excess to Debtors Account, now rectified)
(e) Suspense Alc. .Dr.
To Purchases Alc 1,000
[Purchase Day Book overcast, now rectified] 1,000
() Office Equipment Ac (Typewriter) .....Dr.
To Purchases Alc 2,000
Purchase of Typewriter debited to Purchase Ac, now rectified) 2,000

Dustration 4. (Similar to illustration 2and 3)

Show how will you rectify the
following errors :
aA credit sale of 450 to B. Banker was debited to C.
Banker.
Apurchase of goods for 750 from Bhairab Sen, was debited to his
AAn office Almirah purchased for 750 was debited to Repairs account.
A sum of 350 received from a Debtor was Account.
debited to his account.
Purchase of goods for the consumption of the proprietor was debited to
0. Discount Allowed 75 was credited to Discount Purchase Account for 800.
Received Account. (C.U. B.Com. (0ld Course)]
254 () Financtal Accounting-1.
Solution:
Books of...
Journal Dr.
Cr.
Date Particulars L.F. Amount
Amount
(1) B. Banker Alc Dr. 450
To C. Banker Alc
(Credit Sale to B. Banker wrongly debited to C. Banker, now rectiíied] 450
(2) Suspense Alc Dr. 1,500
To Bhairab Sen Ac
[Credit Purchase from Bhairab Sen debited to his Account, now rectified) 1500
(3) Ofice Furniture A/c
Dr. 750
To Repairs Alc
[Office Almirah purchased and wrongly debited to Repairs Account, now rectified] 750
(4) Suspense Alc Dr.
To Debtors Ac 700
[Cash received from a Debtor but debited to his account, now rectified 700
(5) Drawings Alc.. Dr.
To Purchases Alc 800
[Goods purchased for the consumption of the proprietor debited to Pur 800
chase AcoOunt, now rectified]
(6) Discount Allowed Alc
Dr. 75
Discount Received Alc
Dr.
To Suspense Ac 75
Discount allowed credited to Discount Received Account, now 150
rectified]
Note: Assumed that the Trial Balance has already been
prepared but the Final Accounts have not been drawn.