RECTIFICATION OF ERRORS

Submitted to: Submitted by:

Rajneesh Prakash Verma Kumar Nimish
Lecturer 16M903
DOM&H 2nd Sem
Introduction
• When the business transactions are recorded in the books
of accounts there remains a possibility of accounting
errors. It may be because of hastiness in writing,
negligence, oversight or incomplete knowledge of the
principles of accountancy. Some times in order to
manipulate the books of accounts, errors are committed
intentionally.
• Irrespective of whether the accounting errors are
committed innocently or intentionally they cannot be
rectified by erasing with the help of an eraser. Necessary
accounting effects are to be given in accounts in order to
rectify these errors. Sometimes in an error affects two
accounts, in order to rectify the same, a journal entry is
passed which is known as a rectification entry and it is
recorded in journal proper.
Classification Of Errors
Errors

Omission Commission Principle Compensating

•Errors of Omission
•Errors of Principle
•Error of commission
•Compensatory errors
•Errors of recording to a wrong account
Errors Of Omission
• These errors are incurred in those cases when a
transaction balance completely omitted from the books of
accounts.
• E.g. Rs.4,000 received from Bhavana is left unrecorded.
By writing correct journal entry for this transaction the
above error will be rectified.
L. Debit Credit
Date Particulars
F. Rs. Rs.
Cash A/c Dr. 4,000
To Bhavana’s A/c 4,000
(Being the entry of Rs.4,000 received
from Bhavana left unrecorded.)
Errors Of Commission
• These errors include errors on account of wrong balancing
of an account, wrong posting, wrong carry forwards,
wrong totaling, etc.
• Transaction Recorded in Correct Book with Less/More
Amount
• E.g., total of Rs 996 is carried forwards as Rs 669.
Errors Of Principle
• These are errors in which an entry is recorded in
the wrong class of account.
• In those cases where a proper distinction b/w revenue and
capital items is not made i.e., a capital expenditure is
taken as revenue expenditure or vice versa.
 Contd.
e.g. Rs.5,000 worth furniture purchase is debited to
purchase account. Here purchase of furniture should be
debited to furniture account but purchase account is
wrongly debited by Rs.5,000. To nullify this effect, purchase
account should be credited by Rs.5,000 and furniture
account is to be debited by Rs.5,000 Thus rectification entry
will be as under.

L. Debit Credit
Date Particulars
F. Rs. Rs.
Furniture A/c Dr. 5,000
To Purchase A/c 5,000
(Being the rectification entry for purchase
of furniture wrongly debited to Purchase
account.)
Compensating Error
• In the books of accounts when more than one error exists
but because of their nullifying effects on debit and credit
sides, the trial balance tallies, such errors are known as
compensatory errors.
• E.g., if a sale of Rs. 500 to Ram is debited as only of Rs 50
to his account, while a sale of Rs 50 to Shyam is debited as
Rs 500 to his account, it is a compensating error.
Location Of errors
• Location of errors of principle, errors of compensating
nature and errors of omission is slightly difficult because
of the fact that such errors do not affect the agreement of
the trial balance and, therefore their location may be
considerably delayed. However, location of Errors of
commission is comparatively easier because they affect
the agreement of the trial balance. Thus, the errors can be
classified into two categories from the point of view of
locating them:
▫ Errors which do not affect the agreement of the trial balance.
▫ Errors which affect the agreement of the Trial Balance.
Errors which affect the agreement of
the Trial Balance
• Errors regarding posting
• Errors regarding balance of an account
• Errors in totaling the subsidiary books
• Errors committed at the time of preparing the trial
balance
Errors Regarding Posting
a) Omission of Posting
b) Posting Twice in an Account
c) Posting of a Wrong Amount in an Account
d) Posting in an Account on the Wrong Side
e) Posting Wrong Amount on Wrong Side of an Account
(a) Omission Of Posting
• While posting the transaction recorded in journal or
subsidiary books, if posting is omitted in any account by
mistake, it is known as an error of omission of posting and
this case the trial balance does not tally.
• e.g. Goods of Rs.6,000 purchased from Darshan is
correctly recorded in the purchase book but posting in
Darshan account is omitted.
• This error will be rectified by posting the amount on the
credit side of Darshan’s A/c as under.
Darshan’s account
Dr. Cr.
J. J.
Date Particular Rs. Date Particular Rs.
F. F.
By being the 6,000
amount posting
omitted for
goods purchased
(b) Posting Twice in an Account
• Out of the two accounts affected, if in any one account
posting is done on the correct side but twice by an error,
the trial balance will not tally.
• E.g. Goods of Rs.7,000 sold to Santosh is recorded
correctly in the sales book but by mistake it is posted twice
in the account of Santosh.
• This error will be rectified by giving opposite effect in the
account which is posted twice, by the amount of the
transaction. Thus by writing Rs.7,000 on the credit side of
Snatosh’s A/c and the column of particular ‘by being an
amount wrongly posted twice’ the error will be rectified.
(c) Posting of a wrong amount in an
account
• While posting from the primary books if a wrong amount
is posted in any account, the trial balance does not tally.
• e.g. Rs.500 received from Tarun is posted in his account as
Rs.50. In this case, by writing the deficit figure of Rs.450
in Tarun’s A/c on the credit side and in the column of
particulars ‘by being an amount less credited’ the error
will be rectified.
• When the account is posted by more amount, the error is
rectified by writing the amount of the difference on the
opposite side.
• e.g. Rs.1300 paid for salary, is posted as Rs.3100 in salary
account. Here the error will be rectified by writing
Rs.1800 in salary A/c on the credit side (i.e. opposite side)
an in the column of particulars ‘by being excess amount
posted’.
(d) Posting in an account on the wrong
side
• While posting from the primary books, if the amount is
posted on the wrong side (i.e. on credit side instead of
debit side or vice versa), the trial balance does not tally.
E.g. Rs.800 discount received is debited to discount
account.
• This error will be rectified by writing double the amount
on the correct side. Therefore, in discount received A/c by
writing Rs.1600 on the credit side of and in the column of
particulars ‘by an amount posted on wrong side’ the error
will be rectified.
(e) Posting wrong amount on the
wrong side of the account
• In this case, posting is done in an account on the wrong
side and that too of a wrong amount.
• e.g. Rs.2500 received from Palak, is written correctly in
the cash book but by mistake is written on the debit side of
Palak’s A/c as Rs.500.
• Here the error in Palak’s A/c will be rectified by writing on
the credit side an amount equal to the sum of wrong
amount plus the correct amount i.e. Rs.3000 and in the
column of particulars ‘by posting of wrong amount on
wrong side.’
Errors regarding Balance of an account
• Error in Finding out the Balance of an Account
• Balance of an Account is Written on the Wrong Side
• Balance of an Account is Omitted to be Recorded
• Error in Writing the Balance of an account
• Balance of an Account is Written on the Wrong Side with a
Wrong Amount
(a) Error in Finding out the Balance of
an Account
• If the balance of any account is found either more or less
the trial balance does not tally. If the calculated balance is
less, put the deficit amount on the correct side to rectify
the error. E.g. The credit balance of Abhilash’s A/c is
worked out as Rs.3000 instead of Rs.13,000. Here, write
Rs.10,000 in Abhilash’s A/c on the credit side and in the
column of particulars ‘being less balance worked out
• If the balance is worked out in excess, error will be
rectified by writing that excess amount on the opposite
side of that account.
(b) Error in Writing the Balance of an
account
• In this case the balance is calculated correctly but when it
is brought forward, it is written with a wrong amount and
therefore the trial balance does not tally. E.g. opening
balance of Rs.54,000 of Land and Building A/c us written
as Rs.45,000. Here by writing Rs.9,000 in Land and
Building A/c on the debit side and in the column, of
particulars ‘being opening balance less written and
thereafter by working out the closing balance with
appropriate amount, the error will be rectified.
• If more amount is written for the opening balance, the
errors will be rectified by writing the amount of difference
on the opposite side of the respective balance of that
account.
(c) Balance of an Account is Omitted to
be Recorded
• If the opening balance of any account remains unrecorded,
the trial balance does not tally. E.g. Opening balance of
Rs.6,500 of machinery account remains unrecorded. To
rectify this error write Rs.6,500 on the debit side of
machinery account and thereafter work out the correct
closing balance.
(d) Balance of an Account is Written on
the Wrong Side
• By mistake it he balance of any account is written on the
opposite side (i.e. written on credit side instead of debit
side and vise versa), the trial balance does not tally. E.g. A
balance of Rs.2700 of Darshna, a creditor’s account is
written on the debit side. Error in Darshna, a creditor’s
account will be rectified by writing double the amount i.e.
Rs.5400 on the credit side and in the column of particulars
‘being the amount written on the wrong side’ and
thereafter calculating correct closing balance.
(e) Balance of an Account is Written on
the Wrong Side with a Wrong Amount
• The trial balance does not tally if the balance of any
account is written on the wrong side with a wrong amount.
• E.g. Credit balance of Ram’s A/c Rs.5,600 is written on the
debit side as Rs.6,500. This error will be rectified by
writing Ts.12,100 on the correct side i.e. on credit side and
the column of particulars ‘being the balance written on
wrong side with wrong amount’ and thereafter writing the
closing balance with the correct amount.
Errors in Totaling the Subsidiary Books
• The trial balance does not tally if an error is committed while
totaling subsidiary books like Purchase Book, Sales Book,
Goods return Book, Cash Book etc. This error will be rectified
by writing necessary note in that respective account. A
journal entry is not necessary to rectify this type of error.
• e.g. (1) Total of purchase book is under cast by Rs.1500. This
error will be rectified by writing in purchase account Rs.1500
on debit side and in the column of particulars ‘being the total
undercast.’ (2) In a three column cash book on payment side
discount column total is overcast by Rs.50. This error will be
rectified by writing in discount account Rs.50 on debit side
and in the column of particulars ‘being total overcast’.
• After rectifying these errors closing balance should be
calculated with the correct amount.
Errors Committed While Preparing
Trial Balance
• While preparing the trial balance there remains a
possibility of errors like, error in totaling of the trial
balance, balance of an account is omitted to be recorded,
in recorded twice, is recorded with wrong amount, is
recorded on the wrong side, or is recorded on wrong side
with wrong amount.
• In order to rectify these types of errors no journal entry is
required to pass. After rectifying the errors, a new trial
balance is prepared and it will get tallied.
SUSPENSE ACCOUNT
• When the trial balance does not tally because of some
accounting errors and it requires more time to prepare
final accounts after detection and rectification such
errors, but there is an urgency for preparing final
accounts, temporarily the difference in the trial balance is
transferred to one account, in order to get it tallied and
that account is known as a Suspense Account.
Any Queries???

Thank You!!!