Introduction - Rectification of Errors Commerce Notes | EduRev

Crash Course of Accountancy - Class 11

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Commerce : Introduction - Rectification of Errors Commerce Notes | EduRev

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From the point of view of rectification, the errors may be classified into the following two categories :

(a) errors which do not affect the trial balance.

(b) errors which affect the trial balance.


Errors which do not affect the trial balance:

A. Errors of Omission: The errors of omission may be committed at the time of recording the transaction in the books of original entry or while posting to the ledger.

These can be of two types:

(i) error of complete omission

(ii) error of partial omission When a transaction is completely omitted from recording in the books of original record, it is an error of complete omission.

For example- credit sales to Mohan Rs. 10,000, not entered in the sales book. When the recording of transaction is partly omitted from the books, it is an error of partial omission.

If in the above example, credit sales had been duly recorded in the sales book but the posting from sales book to Mohan’s account has not been made, it would be an error of partial omission.

B. Errors of Principle: Accounting entries are recorded as per the generally accepted accounting principles. If any of these principles are violated or ignored, errors resulting from such violation are known as errors of principle.

An error of principle may occur due to incorrect classification of expenditure or receipt between capital and revenue.

For example- amount spent on additions to the buildings should be treated as capital expenditure and must be debited to the asset account. Instead, if this amount is debited to maintenance and repairs account, it has been treated as a revenue expense. This is an error of principle.

C. Compensating errors: When two or more errors are committed in such a way that the net effect of these errors on the debits and credits of accounts is nil, such errors are called compensating errors. Such errors do not affect the tallying of the trial balance.

For example- if purchases book has been overcast by Rs. 10,000 resulting in excess debit of Rs. 10,000 in purchases account and sales returns book is undercast by Rs. 10,000 resulting in short debit to sales returns account is a case of two errors compensating each other’s effect.

D. Errors of commission: Errors which are committed due to wrong posting of transactions, wrong totalling or wrong balancing of the accounts, wrong casting of the subsidiary books, or wrong recording of amount in the books of original entry, etc.

For example- Raj Hans Traders paid Rs. 25,000 to Preetpal Traders (a supplier of goods). This transaction was correctly recorded in the cashbook. But while posting to the ledger, Preetpal’s account was debited with Rs. 2,500 only. This constitutes an error of commission.


Types of Errors:

(1) Errors of Omission

(2) Errors of Commission

(3) Errors of Principle

(4) Compensating Errors

Omitting an entry completely from the subsidiary books. Trial Balance will still agree.
Omitting to post the Ledger Account from the subsidiary books. Trial Balance will not agree.
Treating a revenue expenditure as capital expenditure or vice versa or treating the sale of a fixed asset as ordinary sale. Trial Balance will still agree.
These are errors that cancel each other, e.g., underposting of the Purchase Journal may be compensated or cancelled out with the undercasting of the Sales Journal by a similar amount. Trial Balance will agree.


Writing the wrong amount in the subsidiary books. Trial Balance will still agree.
Posting an amount in the wrong account but on the correct side.Trial Balance will still agree.
Wrong casting of subsidiary books.
Posting the wrong amount in the Ledger.
Posting an amount on the wrong side.
Wrong balancing of an account.


There can be errors, which affect the equality of debits and credits, and there can be errors, which do not affect the equality of debits and credits. Some common errors include the following:

• Error in totalling of the debit and credit balances in the trial balance.

• Error in totalling of subsidiary books.

• Error in posting of the total of subsidiary books.

• Error in showing account balances in wrong column of the trial balance, or in the wrong amount.

• Omission in showing an account balance in the trial balance.

• Error in the calculation of a ledger account balance.

 Error while posting a journal entry: a journal entry may not have been posted properly to the ledger, i.e., posting made either with wrong amount or on the wrong side of the account or in the wrong account.

Error in recording a transaction in the journal: making a reverse entry, i.e., account to be debited is credited and amount to be credited is debited, or an entry with wrong amount.

Error in recording: a transaction in subsidiary book with wrong name or wrong amount.


Theory:

Q1. What is meant by rectifying entry?

Ans. When an error is rectified by passing a Journal entry, one account being debite and the other account being credited, it is called a rectifying entry.


Q2. Give an example of two sided error.

Ans. Machinery purchased for Rs.5000 has been debited to Purchases Alc.


Q3. Give an example of one sided error.

Ans. A sum of 2,500 given to Ajay is correctly recorded in the Cash Book but omitted to be posted to the Debit of Ajay. The error will be termed as one sided error because the error exists in the account of Ajay only.


Q4. What do you mean by Suspense Account?

Ans. When a Trial Balance does not tally, the difference is put to a newly opened account named 'Suspense Account' and the Trial Balance is thus made to tally. In case, the debit side of the Trial Balance exceeds the credit side, the difference is put on the credit side of 'Suspense Account'. Likewise, if the credit side of the Trial Balance exceeds the debit side, the difference is put on the debit side of 'Suspense Account'.


Double sided errors:

(1) Credit sales to afat for Rs.4,000 was not recorded.

(2) Credit purchases for Rs.7,000  from mafat was not recorded.

(3) Goods returned to didi for Rs.8,000 was not recorded.

(4) Goods returned from gogo for Rs.10,000 was not recorded.

(5) Credit sales to afat for Rs.4,000 was recorded as Rs.400.

(6) Credit purchases for Rs.7,000  from mafat recorded as Rs. 700.

(7) Goods returned to didi for Rs.8,000 was recorded as Rs.800.

(8) Goods returned from gogo for Rs.10,000 was recorded as Rs.1,000.

(9) Credit sales to afat for Rs.4,000 was recorded as Rs.5400.

(10) Credit purchases for Rs.7,000  from mafat recorded as Rs. 8700.

(11) Goods returned to didi for Rs.8,000 was recorded as Rs.9800.

(12) Goods returned from gogo for Rs.10,000 was recorded as Rs.18,000.

(13) Credit sales to afat for Rs.4,000 was recorded in purchase book.

(14) Credit purchases for Rs.7,000  from mafat was recorded in sales book.

15) Goods returned to didi for Rs.8,000 was recorded in sales return book.

16) Goods returned from gogo for Rs.10,000 was recorded in purchase return book.

17) Credit sales to afat for Rs.4,000 was recorded in purchase book for Rs. 4,00.

(18) Credit purchases for Rs.7,000  from mafat was recorded in sales book for Rs.700.

(19) Goods returned to didi for Rs.8,000 was recorded in sales return book for Rs.800.

(20) Goods returned from gogo for Rs.10,000 was recorded in purchase return book for Rs.1000.

(21) Credit sales to afat for Rs.4,000 was recorded in purchase book for Rs. 54,00.

(22) Credit purchases for Rs.7,000  from mafat was recorded in sales book for Rs.7700.

(23) Goods returned to didi for Rs.8,000 was recorded in sales return book for Rs.8800.

(24) Goods returned from gogo for Rs.10,000 was recorded in purchase return book for Rs.21000.

(25) Rs.5000 Paid for repairs for a second hand machinery purchased was debited to repairs a/c.

(26) Rs.300 Paid to jojo was debited to wowo.

(27) Rs.7000 Paid for a purchase of office table was recorded in purchase book (invoice book).

(28) Salary paid to dahiya for Rs.400 was debited to his personal a/c.

(29) Sale of furniture for Rs.4,00 was recorded in sales book.

(30) Sale of furniture for Rs.4,00 was recorded in sales book for Rs.4,00.

(31) No entry has been made for purchases of Rs.500.

(32) No entry has been made for sales of Rs.600.

(33) No entry has been made for purchases return of Rs.700.

(34) No entry has been made for sales return of Rs.800.

(35) An office table purchased for Rs.5000 was passed through the invoice book.

(36) Sale of office table for Rs.600 was passed through the invoice book.

(37) Rs.1000 received from mango was credited to tango.

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