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Accounting Errorppt

The document discusses different types of accounting errors including errors of omission, errors of principle, two sided errors known as compensating errors, and one sided errors. It provides examples of each type of error and how they are rectified by making correcting journal entries.

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midhuzz.midh
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5 views

Accounting Errorppt

The document discusses different types of accounting errors including errors of omission, errors of principle, two sided errors known as compensating errors, and one sided errors. It provides examples of each type of error and how they are rectified by making correcting journal entries.

Uploaded by

midhuzz.midh
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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RECTIFICATION OF ERRORS

What is Rectification of Error?

 Once an error is error is located. It


should be properly corrected. The
correction of accounting error in a
systematic manner is called rectification
of errors.

For verifying: C = W + R
 Error of Omission:
It means that a transaction has been
completely omitted or skipped from the
original books of accounts.

 It will neither appear on the debit side nor


on Credit side of the Trial balance.
Example:

Purchase of goods from Arshad & Co


Rs. 4000 was omitted to be recorded in
the books.

Correct Entry Wrong Entry Rectify Entry


Purchases 4000 Nil Purchases 4000
Arshad & Co 4000 Nil Arshad & Co 4000
Example:

 Goods sold to Mr. Naeem for Rs. 5000 was


wrongly recorded in the sales journal at Rs. 500
and the same amount of Rs. 500 is posted both in
the Mr. Naeem A/c and in sales A/c.

Correct Entry Wrong Entry Rectify Entry


Mr. Naeem 5000 Mr. Naeem 500 Mr. Naeem 4500
Sales 5000 Sales Sales 4500
500
 Error of Principal:
Error of principle mean errors caused
due to violation of generally accepted
accounting principles e.g., personal expenses are
accidently recorded as business expenses.

 Treating capital expenditure as a revenue


expenditure.
 Treating revenue expenditure as a
capital expenditure.
Accounting errors are usually
unintensional mistakes made when
recording transactions.
Example:

 Paid wages on installation of new Machinery on


Rs. 10,000 but recorded as a wages expenses.

Correct Entry Wrong Entry Rectify Entry

Machinery 10,000 Wages Exp. 10,000 Machinery 10,000

Cash 10,000 Cash 10,000 Wages Exp. 10,000


Two Sided Errors:

Compensating Errors:
It means that some errors in
amount have occurred on the
opposite side of two or more accounts
and have cancelled themselves in the
net result.
 Compensate
Examples:

 Purchase A/c has been wrongly debited with Rs.5000


instead of Rs.4000. On the other hand Asif A/c has been
wrongly credited with Rs.1500 instead of Rs.1000 and
Sales A/c has been wrongly credited with Rs.6000 instead
of Rs.5500.

Correct Entry Wrong Entry Rectify Entry


Purchase 4000 Purchase 5000 Purchase 1000
Asif 1000 Asif 1500 Asif 500
Sales 5500 Sales 6000 Sales 500
One Sided Errors:

 When these words like wrongly debited,


wrongly credited and posted are used in any
statements then there is error in one
account. This is called One Sided Error.

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