Rectification of Installation Charges on New Machinery

Background:
In this scenario, there has been an error in recording the installation charges on new machinery purchased. The correct amount of 500 was debited incorrectly to the sundry expenses account as 50. It is essential to rectify this error to ensure accurate financial reporting.

Rectification Process:
To correct this error, the following steps should be taken:

1. Identify the error:
Recognize that the installation charges were initially debited to the wrong account and the amount was recorded incorrectly.

2. Determine the correct account:
The installation charges on new machinery should be debited to a specific machinery installation account or a relevant asset account, depending on the company's chart of accounts.

3. Journal entry:
Create a journal entry to rectify the error. The correct journal entry will include debiting the appropriate account and crediting the sundry expenses account.

The journal entry should appear as follows:

Debit: Machinery Installation Account (or relevant asset account) - 500
Credit: Sundry Expenses Account - 50

This journal entry will correct the error by transferring the installation charges to the correct account and reducing the incorrect debit made to the sundry expenses account.

4. Explanation in the ledger:
In the ledger, make a note or explanation regarding the rectification entry. This will help in providing a clear audit trail and understanding of the correction made.

5. Financial statement impact:
After making the necessary rectification, the financial statements should be adjusted accordingly. The correct installation charges will now be reflected in the appropriate asset account, and the sundry expenses account will show the correct balance.

Conclusion:
Rectifying the error in recording the installation charges on new machinery is crucial for accurate financial reporting. By following the steps mentioned above, the error can be corrected, ensuring that the financial statements provide a true and fair view of the company's financial position.

New machine a/c dr.....500
To sundry exp. a/c 50
To suspens. a/c. 450