Identifying the Error:

The error in this scenario is that a credit sale of goods worth Rs. 1,200 to Ramesh has been wrongly passed through the Purchases book. This means that the transaction has been recorded incorrectly in the accounting records.

Impact of the Error:

Recording a credit sale as a purchase will distort the financial statements of the business. Since purchases represent the cost of goods bought for resale, incorrectly inflating this figure will result in an overstatement of expenses and understatement of profit.

Rectifying the Error:

To rectify the error, the entry needs to be reversed in the Purchases book and correctly recorded in the Sales book. This will ensure that the transaction is accurately reflected in the financial records.

Preventing Future Errors:

To prevent similar errors in the future, it is important to ensure that all transactions are recorded in the correct books based on their nature. Proper training of accounting staff, regular reconciliations, and review of entries can help in identifying and correcting errors promptly.

Conclusion:

In conclusion, it is crucial to accurately record transactions in the correct books to maintain the integrity of the financial statements. Identifying errors promptly and taking steps to rectify them is essential in ensuring the accuracy of accounting records.