Rectification of the Error
An error occurred when the freight charges of Rs. 460 for machinery purchased on 1st October were incorrectly recorded as Rs. 640 in the freight account. To rectify this error, a journal entry must be made to adjust the accounts.
Identifying the Error
- The correct amount for freight: Rs. 460
- Amount recorded in the freight account: Rs. 640
- Overstated amount: Rs. 640 - Rs. 460 = Rs. 180
Rectification Entry
To correct the error, the following entry should be made:
- Debit: Freight Account: Rs. 180 (to reduce the overstated amount)
- Credit: Machinery Account: Rs. 180 (to reflect the correct freight expense on machinery)
Journal Entry Format
Here’s how the rectification entry will look in a journal format:
- Date: [Current Date]
- Debit: Freight Account Rs. 180
- Credit: Machinery Account Rs. 180
Explanation of Rectification
- Freight Account: This account should reflect the actual freight cost incurred. By debiting the freight account, we are reducing the excess amount recorded.
- Machinery Account: The freight cost is part of the total cost of acquiring the machinery. By crediting the machinery account, we ensure that the total cost reflects the correct freight expense.
Conclusion
This rectification entry ensures that the financial records accurately represent the costs associated with the machinery purchase, maintaining the integrity of the accounting records.