ACCOUNTING FOR

MANAGERS (AFM)
PRESENTATION ON
TRIAL BALANCE- STAGE 1
ERROR & IT’S RECTIFICATION
BY
SHASHANK KUMAR
KUMARI PRIYA
NAUSHIN KHAN
 Rectification of Errors

❑ What is error ?

❑ How to rectify the errors ?

 WHY TO RECTIFY?

1. Related
❑ Process of accounting 5.Preparati
on of final transactio
Cause of
statements n
errors
2.
4.Trial
Journal
balance
entries

3.Ledger
posting
 Cause of errors can be divided into two parts

● Intentional Errors
Window dressing

1.closing stock(AS-2)
2.WDV/SLM

● Unintentional Errors
Clerical Errors
1. Effect trial balance
 TYPES OF ERRORS
(From Rectification Point Of View)

STAGE 2 ERRORS (does not affect

STAGE 1 ERRORS ( affect
trial balance)
trial balance)
● ERROR OF COMPLETE
● ERROR OF PARTIAL
OMISSION
COMMISION
● COMPENSATING ERRORS
● ERROR OF POSTING
● ERROR OF PRINCIPLE
● ERROR OF CARRYING
● ERROR OF DUPLICATION
FORWARD
● ERROR OF COMMISSION
● ERROR OF CASTING
 SUSPENSE ACCOUNT

 A temporary account to analyse the discrepancies

 Generally used when there is error in one accounts .

Can be also used for window dressing .

 Example:-
Credit sales to Mohan Rs 10,000 were posted to his account as Rs 7000. This is an
error of commission. Mohan’s account has been debited with Rs 7,000 instead of
Rs 10,000 resulting in short debit of Rs 3,000.

Correct Entry Wrong Entry Rectification Entry

Mohan’s A/c Dr. Rs 10,000 Mohan’s A/c Dr. Rs 7,000 Mohan’s A/c Dr. Rs 3,000

To Sales A/c Rs 10,000 To Sales A/c Rs 10,000 To Suspense A/c Rs 3,000

 STAGE 1 ERRORS

These types of error affect the agreement of the Trial Balance .Ledger balances are not drawn hence accounts are not yet closed .

Two types of Stage 1 Errors

Errors for whose rectification Errors which can be

no journal entry is possible. rectified by journal entry.
 ERROR OF CASTING

A mistake in relation to totaling is called error

in casting.

Overcasting
Excess totaling is called
overcasting.
There are two types of error
in Casting:
Undercasting
Short totaling is called
undercasting.
 CASTING ERROR

Undercasting of purchase Overcasting of sales

book means under book means over
totalling of Purchase totalling of Sales Book
Book,indicating that indicating that Sales
Purchase Account has Account has been
been debited less with the credited in excess with
amount the amount of
under-total of the over- total of Sales
Purchase Book. Book.
 ERROR OF PARTIAL OMISSION

 Error of partial omission arises if transaction is not completely

recorded or if completely recorded has not been completely posted
into ledger accounts.
 As a result of it the Trial balance does not agree.
 Example- credit sales recorded in the sales book but not posted into
party’s account.
 ERROR OF POSTING
Error of posting
to the correct
account but with
wrong amount.
Error of posting
correct amount to
the wrong side of
an account .

Error of posting
to the wrong side
with wrong
amount.
 ERROR OF CARRYING FORWARD
 When a mistake is committed in carrying forward a total of one
page to the next page.
 For example:
Total of purchase book is carried forward as 10000 instead
of 1000.
 STEPS TO LOCATE THE ERRORS

Difference in the trial balance even minor ones must be located and rectified.

The two columns of the trial balance should be totaled again.

It should be seen that the cash and bank balances have also been written in the trial balance.

The exact difference in the trial balance should be established.

The casting of subsidiary books should be checked again.

If the difference is big ,the balance in the various accounts should be compared with the corresponding accounts in the
previous period.

If it is not possible to locate the errors, the difference in the trial balance is temporarily transferred to
Suspense Account .Whenever any one sided error is detected,it is subsequently rectified through Suspense Account.
 QUESTION ANSWER ROUND
Q1- Which of the following errors will affect the trial balance?
A-Repairs to building wrongly debited to Building A/C.
B-Total of Purchase journal short by 1000.
C-Freight paid on new machinery debited to Freight A/C.
D-None of the three.
Q2-In case trial balance does not agree,difference is put to
A-Suspense A/C
B-Drawing A/C
C-Capital A/C
D-Trading A/C
Q3-Rectification of which types of errors requiring opening of Suspense A/C?
A-Error of Principle
B-Complete omission
C-Partial omission
D-Error of commission
LET’S UNDERSTAND
RECTIFICATION OF
ERRORS WITH THE
HELP OF
ILLUSTRATIONS
 ERROR OF PARTIAL OMISSION
ILLUSTRATION: RS. 4000 Paid to Raj was entered in Cash book
but omitted to be posted in ledger

RECTIFICATION ENTRY

RAJ’S A/C DR. 4000

TO SUSPENSE A/C 4000

(For cash paid to Raj ommited to be posted to his account)

 ERRORS OF POSTING
❖ CORRECT ACCOUNT WRONG AMOUNT
ILLUSTRATION: RS. 5000 paid to Mohit was debited to his account as RS. 500

WRONG ENTRY CORRECT ENTRY RECTIFICATION ENTRY

MOHIT A/C DR. 500 MOHIT A/C DR. 5000 MOHIT A/C DR. 4500

TO CASH A/C 500 TO CASH A/C 5000 TO SUSPENSE A/C 4500

 ❖ CORRECT AMOUNT , WRONG SIDE OF ACCOUNT

ILLUSTRATION: Received RS. 550 from X, were posted to debit of his

Account

WRONG ENTRY CORRECT ENTRY RECTIFICATION ENTRY

X’S A/C DR . 550 CASH A/C DR 550 SUSPENSE A/C DR. 1100
TO CASH A/C 550 TO X’S A/C 550 TO X’S A/C 1100
 ❖ WRONG SIDE, WRONG AMOUNT

ILLUSTRATION: RS. 6000 paid to Rohit was credited to his account as

RS.600 .

WRONG ENTRY CORRECT ENTRY RECTIFICATION ENTRY

CASH A/C DR. 600 ROHIT’S A/C DR. 6000 ROHIT’S A/C DR. 6600
TO ROHIT’S A/C 600 TO CASH A/C 6000 TO SUSPENSE A/C 6600
 ERRORS OF CASTING
❖ OVERCAST
ILLUSTRATION:Sales Book was overcast by RS. 2000.

WRONG ENTRY CORRECT ENTRY RECTIFICATION ENTRY

CASH A/C DR. 22000 CASH A/C DR. 20000 SALES A/C DR. 2000
TO SALES A/C 22000 TO SALES A/C 20000 TO SUSPENSE A/C 2000
 ❖ UNDERCAST

ILLUSTRATION: Purchase book was undercast by RS.3000

WRONG ENTRY CORRECT ENTRY RECTIFICATION ENTRY

PURCHASE A/C DR. 5000 PURCHASE A/C DR. 8000 PURCHASE A/C DR. 3000
TO CASH A/C 5000 TO CASH A/C 8000 TO SUSPENSE A/C
3000
 UNDERCAST

 ILLUSTRATION: Purchase book was undercast by RS.3000

WRONG ENTRY CORRECT ENTRY RECTIFICATION ENTRY

PURCHASE A/C DR. 5000 PURCHASE A/C DR. 8000 PURCHASE A/C DR. 3000
TO CASH A/C 5000 TO CASH A/C 8000 TO SUSPENSE A/C
3000
 ERROR OF CARRYING FORWARD
ILLUSTRATION: A total of RS. 596 in Purchase Book has been carried forward to next page as RS.
695

WRONG ENTRY CORRECT ENTRY RECTIFICATION ENTRY

PURCHASE A/C DR. 695 PURCHASE A/C DR. 596 SUSPENSE A/C DR. 99
TO CASH A/C 695 TO CASH A/C TO PURCHASE A/C 99
596
THANKYOU