Scribd
Upload
7 views

Topic - Rectification of Errors

Uploaded by

3103.jk
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
7 views

Topic - Rectification of Errors

Uploaded by

3103.jk
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 22

TOPIC – RECTIFICATION

OF ERRORS
INTRODUCTION
 Accounting Errors refer to the common mistakes made while
recording or posting accounting entries.
 These discrepancies are not fraudulent or intentional.
 Companies can easily identify these mistakes while tallying
accounts and can rectify them as soon as they are detected.
1. ERROR OF OMISSION
 When a transaction
is totally omitted to
be recorded in the
journal or the
subsidiary books or
the ledger, such an
error is known as an
error of omission.
For Example:
 Goods sold on credit to Rahul not recorded in Sales Book.
 Furniture sold on credit to Riddhi recorded in Journal Proper
but not posted.
TYPES OF ERROR OF OMISSION

 Errors of Partial Omission


affect the matching of
TRIAL BALANCE.
EXAMPLES
 Error of Complete Omission:
 Goods purchased from Salim not recorded at all

OR
 Goods purchased from Salim have been

correctly recorded in Purchase Book but is not


posted.

 Error of Partial Omission:


Purchase Book
Date Invoice No. Particular L.F. Details Amount (₹)
2022
Jan 21 109 Salim 15,000

LEDGER
Dr. Salim's Account Cr.
Date Particulars J.F. Amount (₹) Date Particulars J.F. Amount (₹)
ERROR OF COMMISSION
Errors of Commission are those errors
which arise due to:

Wrong Recording

Wrong Posting

Wrong Totalling or
Casting

Wrong Calculation

Wrong Balancing or
carrying forward
EXAMPLES
 ERROR OF RECORDING
 Goods of ₹ 5,000 purchased on credit from Mohan are recorded in
the Purchase Book as ₹ 50,000.
 Credit Purchases of Sahil wrongly recorded in Sales Book.

o ERROR OF POSTING
 Cash Sales of ₹ 90,000 posted to Sales Account as ₹ 9,000.
 Posting total of Sales Book in the Purchase Account instead of Sales
Account.

o ERROR OF CASTING OR TOTALLING


 Purchase is totalled as ₹ 1,00,000 instead of ₹10,00,000.

 ERROR OF CASTING OR TOTALLING


 Total of Purchase Book is carried forward as ₹ 20,000
ERROR OF PRINCIPLE
 When a transaction is recorded in
contravention of accounting principles, it is
an error of principle.
 Such errors do not affect the matching of

trial balance as correct amounts are placed


on the correct side but in a wrong account.

 Examples:
 Revenue Expenditure has wrongly been

treated as Capital Expenditure.


 Capital Expenditure has wrongly been

treated as Revenue Expenditure.


EXAMPLE OF ERROR OF PRINCIPLE
COMPENSATING ERRORS
 Compensating Errors are those
errors, in which effect of one
error is nullified by the effect
of another error.
For Example:
 Shyam’s account was debited

with ₹ 100 instead of ₹1,000 while


Ram’s account was debited with ₹
1,000 instead of ₹ 100.
 In this case, Shyam’s account was

debited ₹ 900 less and Ram’s account


was debited in excess of ₹ 900.
 Thus, both errors have nullified the

impact of each other.


 Such errors do not affect the
LET’SIDENTIFY
THE TYPE OF
ERRORS……
RECTIFICATION OF ERROR
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.
A Journal entry is passed which is known as a
rectification entry and it is recorded in Journal proper.
Generally two principles should be taken into
consideration to rectify the accounting errors.

Undo what is
wrong
Do what is
correct.
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 temporary account, in order to get it tallied
and that account is known as a Suspense
Account.
ERROR OF COMPLETE OMISSION
Credit Purchase of ₹ 5,000 from Mahesh were not recorded
in Purchase Book.
Rectifying Entry:
Purchases A/c ___________ Dr. 5,000
To Mahesh 5,000
ERROR OF PARTIAL OMISSION
Credit Purchase of ₹ 5,000 from Mahesh were not posted
in Mahesh’s Account.
Rectifying Entry:
Suspense A/c ___________ Dr. 5,000
To Mahesh 5,000
ERRORS OF COMMISSION:-

1. ERROR OF RECORDING
 Credit Purchases from Smita worth ₹ 15,000 recorded as ₹
1,500 in the Purchase Book.
Wrong Entry:
Purchases A/c __________ Dr. 1500
To Smita 1500
Correct Entry:
Purchases A/c __________ Dr. 15000
To Smita 15000
 Purchases are showing a short debit of ₹ 13,500 and

Smita is showing a short credit of ₹ 13,500.


Rectifying Entry:
Purchases A/c__________ Dr. 13,500
To Smita A/c 13,500
ERROR OF POSTING
 A credit sale of ₹ 5,000 to Rahul is posted as ₹
10,000.
 There is an excess debit of ₹ 5,000 in Rahul’s account

and an excess credit of ₹ 5,000 in Sales account.


 Rectifying Entry:

Suspense A/c ___________ Dr. 5,000


To Rahul 5,000
 A credit purchase of ₹20,000 from Riddhi was wrongly posted

to Ayaan’s account
o Rectifying Entry:

Ayaan_____________ Dr. 20,000


To Riddhi 20,000
ERROR OF CASTING /TOTALLING
 The Purchase Book has been overcast by ₹ 4,000.
 So, Purchase account will be showing an excess debit of ₹

4,000
 Rectifying Entry:

Suspense A/c __________ Dr. 4,000


To Purchase A/c 4,000
 The Sales Book has been undercast by ₹ 8,000.

 So, Sales account is showing a short credit of ₹ 8,000

 Rectifying Entry:

Suspense A/c __________ Dr. 8,000


To Sales A/c 8,000
ERROR OF PRINCIPLE
 Wages paid for the construction of office building
debited to Wages Account ₹ 20,000.
 Rectifying Entry:

Building A/c________ Dr. 20,000


To Wages A/c 20,000
COMPENSATING ERRORS:
 Shyam’s account was debited with ₹ 100 instead of
₹1,000 while Ram’s account was debited with ₹ 1,000 instead of
₹ 100.
 In this case, Shyam’s account was debited ₹ 900 less and Ram’s
account was debited in excess of ₹ 900.
 Rectifying Entry:
Ram___________ Dr. 900
To Shyam 900

You might also like