Rectification Entry for Freight Payment
When an error occurs in accounting, such as misclassifying an expense, a rectification entry is necessary to correct the mistake. In this case, Rs. 460 paid as freight on machinery was incorrectly recorded as Rs. 640 in the freight account.
Identifying the Error
- The actual freight amount: Rs. 460
- Amount debited to the freight account: Rs. 640
- Overstatement of freight expense: Rs. 640 - Rs. 460 = Rs. 180
Rectification Entry
To correct the error, the following journal entry should be made:
- Debit: Machinery Account (for the correct freight amount) Rs. 460
- Credit: Freight Account (to adjust the overstatement) Rs. 180
This entry reflects the actual cost related to the machinery and corrects the excess amount charged to the freight account.
Journal Entry Summary
- The correct freight amount is recognized under the machinery account, ensuring accurate asset valuation.
- The freight account is adjusted to reflect the true expense incurred, maintaining the integrity of financial records.
Conclusion
By making the rectification entry, the financial statements will accurately represent the transactions, ensuring compliance and providing reliable information for decision-making. Proper documentation of such corrections is also crucial for future reference and audit purposes.