Identification and rectification

of errors in trial balance

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 Identification of errors

 Some of the steps that an accountant can

take to identify and locate the errors-
 Check the total of debit and credit side in
trial balance.
 Compare the account names and totals in
ledger and trial balance.
 Check and compare the trial balance with
previous year to locate any significant
additions or deletions of accounts, and check
each account's totals to detect any
unexplained significant difference
Cont…………..
 Conti…………….
 Double check the balances of each account in
the ledger books
 Double check the posting of transactions from
journal to ledger
 Ifthe error amount is divisible by 2, there is a
possibility that the error has been made of an
amount half of the difference while posting
to ledger or trial balance.
 Ifthe error amount is a multiple of 9, there is
a possibility that the figures of amount are
transposed.
Rectification of errors

 In order to rectify the errors, the errors are

classified into the ones that do not affect the
trial balance, and the ones that affect the
trial balance.
 This is because the former affects two
accounts while the latter generally affect a
single account.
 Rectification of errors that do not affect the
trial balance
 These errors can be rectified by passing
a journal entry with correct debit and
credit accounts. The rectification
process does the following-
 reversingthe error by cancelling the
effect of wrong debit or credit
 passingthe correct entry to record
correct debit or credit
 Inother words, the rectification entry
will debit the account that has a short
debit or excess credit and credit the
account that has an excess debit or
short credit.
 The following examples will help understand these
errors rectification better-

 Omitting the entry in sales book- made credit sales to

Timber Art Limited for Rs. 65000. This error will be
rectified by passing the following entry in Journal
 Rectification of errors that affect the trial
balance

 These errors generally affect a single account

and or rectified by recording a journal entry
supported by an explanation.
 Also, these entries can be rectified by
opening a suspense account. In this case, the
accountant tallies the trial balance by putting
the difference on the shorter side as a
suspense account.
 Rectification of errors in next accounting
period
 When the errors leading to suspense account
are located, then the correct entry is passed
and the suspense account is closed. However,
there may be a possibility that the errors are
not located during an accounting year and
does the suspense account cannot be closed
and transferred to the next accounting year.
 When the errors are located in the next
accounting year, the same are rectified by
debiting or crediting the profit and loss
account adjustment account.
 Practice Questions

Theory questions
 1. What is the meaning of a trial balance?
Briefly explain the steps undertaken to locate
the errors in a trial balance.
 2. Categorize and explain the errors causing
difference in the trial balance. Illustrate with
examples.
 3. What are the purposes of preparation of a
trial balance?
 Numerical question-1

1. Rectify the following errors.

A. Sale made to Ravi Timber on credit for Rs 57000 was
not recorded
B. Purchase from KEI furniture for Rs 40000 recorded as
Rs 4000.
C. Goods return to KEI furniture for Rs 4000 were
recorded at Rs 3040
D. Goods returned from Ravi Timber for Rs 6000
recorded at Rs 7000
2. Rectify the following errors-
A. Salary paid for Rs 8000 was debited to employee's
personal account.
B. Drawings made by the owner for Rs 20,000 debited
to sundry expenses account.
C. Sales book overcast by Rs 5000
D. Purchase book undercast by Rs 4200
E. Cash sales for Rs 23000 were not posted
F. Credit sales amounting to Rs 12500 to ABC Exports
were posted to XYZ Limited
Trial balance of Dev Limited did not agree for the year 2018. He put
the difference to suspense account and discovered the following
errors-
 The balance in the sales book for the month of July was carried
forward to the next page at Rs 20,000 instead of 24000.
 The wages paid for the installation of office machinery for Rs
1500 was wrongly posted to wages account for Rs 500.
 machinery purchased from Nipun enterprises for Rs 35,000 on
credit was wrongly entered in the purchase book at Rs 65000 and
posted from Nipun enterprises as Rs 3500.
 credit sales to Surbhi Limited for Rs 50,000 was wrongly recorded
in the purchases book.

Conti…………..
 Cont…………
 Goods return to ABC enterprises recorded in sales book
amounting to Rs 2000.
 credit purchases from GNG company for Rs 56,000 were
recorded in the sales book. However the account of GNG
company was correctly credited.
 Credit purchases from mukta enterprises Rs 87000 were
recorded in sales book at Rs 97000 and posted from there to the
credit of mukta enterprises at Rs 67000.
 Credit sales to raghav Limited Rs 40,000 has been wrongly
credited to Raghavan account at Rs 10,000.
 Bills receivable from GHB enterprises for Rs 16000 was
dishonoured and post it to the debit of allowances account.
 Old furniture sold for Rs 2000 was posted to sales account
 Depreciation on furniture Rs 1800 was not posted
 Rectify the errors and prepare suspense to find the difference
in trial balance.
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