JAIPUR NATIONAL UNIVERSITY

Fundamental Of Accounting

Submitted by Submitted toAbhilash Varghese Ankit SirB.Com I Sem

RECTIFICATION OF ERRORS

Concept

Trial Balance(Verifies the arithmetical accuracy) may not Agree/tally

Because of some errors committed while recording/Classification stage

Errors are unintentional mistakes

The trail may agree ( even after some errors)as some does not affect the trial balance

Errors can be of Two Types

Errors affecting the Trial Balance

Errors Doesn’t affecting the Trial Balance

Types of Errors (Sides/Impact Point of View)

Single Sided Errors Double sided Errors

Error with only one Errors with both theSide(Dr/Cr) of Entry sides

Affect Trial Balance Do not affect Trial Balance

Principal Errors

Transaction in contravention of accounting principles

Error in recognizing Capital/Revenue Transactions

Does not affect the Trial Balance

Omission ErrorsNot considering a transaction

Full Omission Partial Omission

Both Aspects(Dr/Cr) Entry not posted

During Recording During Posting(not entered in Journal at all)Not affect the Trial Balance

Affect the Trial Balance.

Commission Error

Silly mistakes because of carelessness

Errors may relate to a wrong amount,Correct amount in Wrong Account/Side

While Journalizing, Ledger posting , Casting, Balancing or Carry forwarding

May/ may not affect the Trial BalanceGenerally these affect Trial Balance

Compensatory Errors

Effect of errors is cancelled

The second error compensate the impact of the first error

Do not affect the Trial Balance

Rectification of Errors

Rectification method depends on the Timing of detection of an error

Before After Final AccountsTrail Balance (in next

period) After Trial Balance

(Before Final Accounts)

Rectification of ErrorsDouble sided Errors- Rectified by a

Rectifying Journal Entry

Single Sided Errors

Suspense A/c P&L Adj. A/c (After Tr. Bal.) (Next Period)

Narration/Rectification statementWithout Suspense A/c(before Tr. Bal.)

Rectification of Double Sided Error

Pass the wrong entry

Reverse the Wrong Entry

pass the correct entry

pass the Rectification entry (comparing the second & third Entry).

Errors (Detected in next Period)

Rectifications done through “ P&L Adjustment A/c/Prior Period Items A/c

(Error’s ultimate effect on P&L A/c is considered)”

Wages of ` 2,500 paid for the installation of machinery charged to wages account(detected next year)

Rectification entryMachinery Account Dr. 2,500 To Profit and Loss Adjustment Account 2,500

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