The original entry of debiting the Wages Account with ₹20,000 for the construction of office is incorrect. The wages account is used to record the payment of salaries and wages to employees and not for the construction of an office. The correct account that should have been debited is the Building Account.



The rectified entry for the payment of wages for the construction of the office is as follows:

Building Account Dr. ₹20,000

To Bank Account ₹20,000

This entry correctly reflects that the amount of ₹20,000 has been paid from the bank account for the construction of the office building. The Building Account is debited as it is an asset account and the office building is an asset.



The rectification of the entry has the following impact on the financial statements:

1. Income Statement: There is no impact on the income statement as it only records revenue and expenses incurred during the period.

2. Balance Sheet: The rectification results in an increase in the value of the Building Account by ₹20,000. This increase in the value of the asset account results in an increase in the total assets of the company.

3. Cash Flow Statement: The cash flow statement would show an outflow of ₹20,000 under the investing activities section as it represents the payment made for the construction of the office building.



It is important to ensure that the correct accounts are debited and credited to avoid errors in financial statements. Rectifying the entry ensures that the financial statements accurately reflect the financial position of the company.

Building a/c dr 20000
to wages a/c 20000