On the basis of Reasons of errors:

The errors are of basically following types:

(1) Errors of Principle:

These are mistakes due to lack of knowledge of accounting principles.

(2) Clerical errors:

These are mistakes due to carelessness, overlooking etc. Clerical errors can be:

(a) Errors of Commission:

These are mistakes due to wrong totaling, posting, wrong balancing, and wrong carry forward in the accounting books.

(b) Errors of Omission:

These are mistakes due to omission of entries in the subsidiary journals, omission of posting, omission of carry forward etc. The omission can be complete or partial affecting single side or both the sides of the Trial Balance.

(c) Compensating Errors:

These are mistakes that cancel mutually. One excess Debit cancels one excess Credit; one short Debit cancels one Short Credit and so on.

On the basis of their Effect on Trial Balance:

The errors can be classified into:

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

1. In case of complete omission of entry i.e. from original books.

2. In case of error of principle.

3. In case of compensating errors.

4. In case of wrong amount in books of original entry.

5. Error of posting i.e. correct side, correct amount but in wrong account.

(b) Errors which affect the trial balance.

All other errors will be disclosed by trial balance as the trial balance will not tally. Following are such cases:

1. Errors of posting to wrong side of the same or another account.

2. Posting the wrong amount, to same or another account.

3. Posting the wrong amount and to wrong side, to the same or another account.

4. There can be errors of balancing the ledger account.

5. There can be errors in totaling of ledger accounts or sides of Trial Balance.

6. Some partial omission of posting can be there i.e. from journal to ledger or from ledger to Trial balance.

On the basis of their Effect on number of sides affected:

The errors can be classified into:

(1) Single sided errors.

Single sided errors affect only one side of the Trial Balance.

(2) Double sided errors.

Double sided errors affect both the sides of Trial Balance, by equal amount or unequal amounts.

Identify the Types of Errors:

Examples of Accounting Errors

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Errors of Principle:

(a) Salary paid ₹ 5,000, debited to employee’s personal account.

(b) Rent Paid ₹ 4,000 was posted to landlord’s personal account.

(c) Goods withdrawn by proprietor for personal use ₹ 1,000 were debited to sundry expenses account.

(a) Furniture purchased for ₹ 10,000 wrongly debited to purchases account.

(b) Machinery purchased on credit from Raman for ₹ 20,000 was recorded through purchases book.

(c) Repairs on machinery ₹ 1,400 debited to machinery account.

(d) Sale of old machinery at book value of ₹ 3,000 was credited to sales account.

(a) Goods withdrawn by proprietor for personal use ₹ 800 were not posted to Drawings account.

Errors of complete omission (from accounting books):

(i) Credit sales to Dinesh ₹ 8,000 were not recorded.

(ii) Credit purchases from Angad ₹ 5,000 were not recorded.

(iii) Goods returned to Akaash ₹ 3,000 were not recorded.

(iv) Goods returned from Suman ₹ 4,000 were not recorded.

Examples of Accounting Errors

Errors of Omission (of posting):

(a) Credit sales to Dinesh ₹ 5,000 were not posted.

(b) Credit purchases from Angad ₹ 9,000 were not posted.

(c) Goods returned to Akaash ₹ 4,000 were not posted.

(d) Goods returned from Suman ₹ 1,000 were not posted.

Errors of Commission (wrong amount-short amount):

(i) Credit sales to Dinesh ₹ 5,000 were recorded as ₹500.

(ii) Credit purchases from Angad ₹ 9,000 were recorded as ₹900.

(iii) Goods returned to Akaash ₹ 4,000 were recorded as Rs 400.

(iv) Goods returned from Suman ₹ 1,000 were recorded as ₹100.

Errors of Commission (wrong amount-more amount):

(i) Credit sales to Dinesh ₹ 5,000 were recorded as ₹5,200.

(ii) Credit purchases from Angad ₹ 9,000 were recorded as ₹ 9,900.

(iii) Goods returned to Akaash ₹ 4,000 were recorded as Rs 4,040.

(iv) Goods returned from Suman ₹ 1,000 were recorded as ₹1,500.

Examples of Accounting Errors

Errors of Commission (wrong subsidiary book):

(a) Credit Sales to Dinesh ₹ 5,000 were recorded in purchases book.

(b) Credit Purchases from Angad ₹ 9,000 were recorded in sales book.

(c) Goods returned to Akaash ₹ 4,000 were recorded in the sales return book.

(d) Goods returned from Suman ₹ 1,000 were recorded in purchases return book.

Errors of Commission (overcasting of subsidiary book):

(a) Sales book overcast by ₹ 500.

(b) Purchases book overcast by ₹ 500.

(c) Sales return book overcast by ₹ 300.

(d) Purchase returns book overcast by ₹ 200.

Errors of Commission (undercasting of subsidiary book):

(a) Sales book undercast by ₹300.

(b) Purchases book undercast by ₹400.

(c) Return Inwards book undercast by ₹200.

(d) Return outwards book undercast by ₹100.

Examples of Accounting Errors

Errors of Commission (posting with wrong amount):

(a) Credit sales to Dinesh ₹ 5,000 were posted as ₹ 9,000.

(b) Credit purchases from Angad ₹ 9,000 were posted as ₹ 5,000.

(c) Goods returned to Akaash ₹ 4,000 were posted as ₹ 5,000.

(d) Goods returned from Suman ₹ 1,000 were posted as ₹ 3,000.

Errors of Commission (posting to wrong account):

(a) Credit sales to Dinesh ₹ 5,000 were posted to Karan.

(b) Credit purchases from Angad ₹ 9,000 were posted to Gobind.

(c) Goods returned to Akaash ₹ 4,000 were posted to Naresh.

(d) Goods returned from Suman ₹ 1,000 were posted to Manish.

Errors of Commission (posting to wrong side of the account):

(a) Credit sales to Dinesh ₹ 5,000 were posted to the credit of his account.

(b) Credit purchases from Anu ₹ 9,000 were posted to the debit of his account as ₹ 5,000.

(c) Goods returned to Akaash ₹ 4,000 were posted to the credit of his account.

(d) Goods returned from Ram ₹ 1,000 were posted to the debit of his account as ₹ 2,000.

Examples of Accounting Errors

Errors of Commission (wrong amount in wrong account):

(a) Credit sales to Dinesh ₹ 5,000 were posted to Karan as ₹ 500.

(b) Credit purchases from Amar ₹ 9,000 were posted to the debit of Aman as ₹ 900.

(c) Goods returned to Akaash ₹ 4,000 were posted to the credit of Naresh as ₹ 3,000.

(d) Goods returned from Suman ₹ 1,000 were posted to the debit of Manish as ₹ 2,000.

Rectification Of Errors

Learning Games and Activities in Accountancy – Class 11

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This was the Identification of Accounting Errors - 20 Cases

Rectification of Single Sided Errors

Learning Games and Activities in Accountancy – Class 11

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For the correction of mistakes, rubbing, cutting, erasing is not to be followed as such methods give rise to suspicions and auditors can object to the use of such methods. Rectification of errors is to be done by following accounting procedures only.

How to rectify the error?

(Process of Rectification of Errors)

Analyze the transaction involving error w.r.t the amount and account affected.

Then:

Do what has not been done; Cancel what has been wrongly done.

For every wrong debit, cancel by crediting.

For every wrong credit, cancel by debiting.

For excess debit, cancel the excess by crediting.

For excess credit, cancel the excess by debiting.

For every short debit, debit the concerned account.

For every short credit, credit the concerned account.

Keep in mind the following points:

1. Recorded means entered in books of original entry - Journal.

2. Posted means entered in ledger accounts.

3. Whatever error is clearly stated, consider that only, assume other things to be correct.

Rectification of Single sided errors:

Single sided errors can be discovered:

1. Before preparing Trial Balance.

2. After preparing Trial Balance.

1. Before preparing Trial Balance:

In this case, the errors are to be rectified without using suspense account.

2. After preparing Trial Balance:

In this case, the errors are to be rectified using suspense account.

Suspense Account

Suspense account is a temporary account prepared for the purpose of making the sides of the Trial Balance equal for the ultimate purpose of preparing Final Accounts.

If Debit side or Credit side of Trial balance is short the balance is put to suspense account. So, the suspense account is credited when the debit side of trial balance is short and suspense account is debited if the credit side of trial balance is short.

The debit balance of suspense account is taken to the Asset side of the Balance sheet and the credit balance of suspense account is taken to the Liability side of the Balance sheet.

This account is used to remove single sided errors.

When all the single sided errors are removed using suspense account the balance of suspense account becomes nil. If, after removing the error there still remains some balance in the suspense account, it means there are still some errors that remained undiscovered.

Rectification of Errors MCQs

Types of Accounting Errors

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If discovered before Trial Balance:

1. Credit sales to Rohan ₹ 10,000 were not posted to his account.

Rohan’s A/c should be debited with ₹10,000 as:

‘To omission of posting’

2. Credit sales to Rohan ₹ 10,000 were posted to his account as ₹ 7000.

Rohan’s A/c should be debited with ₹3,000 as:

‘To short posting’

3. Credit sales to Rohan ₹ 10,000 were posted to his account as ₹ 12,000.

Mohan A/c should be credited with ₹2,000 as:

‘By Excess posting’

4. Purchases book overcast by ₹ 1,000.

Purchase A/c should be credited with ₹ 1,000 as:

‘By overcasting of Purchases Book’

5. Credit purchases from Raghu ₹ 20,000

(a) were not posted to his account.

Raghu A/c should be credited with ₹20,000 as:

‘By omission of posting’

(b) were posted to his account as ₹ 2,000.

Raghu A/c should be credited with ₹18,000 as:

‘By short posting’

(c) were posted to the debit of Raghu’s account.

Raghu A/c should be credited with ₹40,000 as:

‘By posting to wrong side’

6. Sales return book overcast by ₹ 1,000.

Sales Return A/c should be credited with ₹ 1,000 as:

‘By excess posting’

7. Purchases book was undercast by ₹ 600.

Purchases A/c should be debited with ₹600 as:

‘To undercasting of Purchases book’

Note: In case of rectification of single sided error, an indication of mistake is to be given in particulars like In case of no.7 error above, instead of ‘To undercasting of Purchases book’,It could be written as ‘Mistake in total of Purchases book’.

Rectification of Single Sided Errors (a)

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If discovered after Trial Balance:   

8. In the sales book total of page no. 6 was carried forward to page 7 as ₹ 1,000 instead of ₹ 1,200 and total of page 8 was c/f to page 9 as ₹ 5,600 instead of ₹ 5,000.

Sales A/c           Dr. 400

To Suspense A/c 400

9. Credit purchases from T & Co. ₹ 5,000 were recorded through sales book. However, T & Co. were correctly credited.

Purchases A/c  Dr. 5,000

Sales A/c          Dr. 5,000

To Suspense A/c 10,000

10. Furniture purchased for ₹ 5,000 was posted to purchase account as ₹ 500.

Furniture A/c   Dr. 5,000

To Purchases A/c       500

To Suspense A/c     4,500

11. Total of sales returns book ₹ 3,000 was not posted to the ledger.

Sales Return A/c Dr. 3,000

To Suspense A/c      3,000

12. Cash received from Gobind, a debtor, ₹ 5,000 was posted to his account as ₹ 500.

Suspense A/c          Dr. 4,500

To Gobind A/c                4,500

13. Goods returned to Ramesh ₹ 700 were posted to his account as ₹ 70.

Ramesh’s A/c            Dr. 630

To Suspense A/c               630

14. Bill receivable from Harish ₹ 1,000 was dishonoured and wrongly debited to allowances account as ₹ 10,000.

Harish A/c                  Dr. 1,000

Suspense A/c             Dr. 9,000

To Allowances A/c          10,000

15. Cash received from Mannat ₹ 4,000 was posted to Manmeet as ₹ 1,000.

Manmeet A/c           Dr. 1,000

Suspense A/c           Dr. 3,000

To Mannat A/c           4,000

16. Purchases book undercast by ₹ 1,000.

Purchases A/c         Dr. 1,000

To Suspense A/c             1,000

17. Repairs on machinery ₹ 1,600 wrongly debited to Machinery account as ₹ 1,000.

Repairs A/c               Dr. 1,600

To Machinery A/c            1,000

To Suspense A/c                600

Rectification of Single Sided Errors after Trial Balance - 10 Cases

Rectification Of Double Sided Errors

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1. Credit sales to Rohan ₹ 10,000 were not recorded in the sales book.

Rohan’s A/c                 Dr. 10,000

To Sales A/c                           10,000

2. Credit sales to Rohan ₹ 10,000 were recorded as ₹ 1,000 in the sales book.

Rohan’s A/c                 Dr. 9,000

To Sales A/c                          9,000

3. Credit sales to Sohan ₹ 10,000 were recorded as ₹ 12,000.

Sales A/c                      Dr. 2,000

To Sohan‘s A/c                      2,000

4. Credit sales to Rohan ₹ 10,000 was correctly recorded in the sales book but was posted to Ramesh’s account.

Rohan’s A/c                  Dr. 10,000

To Ramesh’s A/c                   10,000

5. Rent paid ₹ 2,000 were wrongly shown as payment to landlord.

Rent A/c                      Dr. 2,000

To Landlord’s A/c                  2,000

6. Credit purchases from Raghu ₹ 20,000

(a) were not recorded.

Purchases A/c        Dr. 20,000

To Raghu’s A/c        20,000

(b) were recorded as ₹ 10,000.

Purchases A/c        Dr. 10,000

To Raghu’s A/c       10,000

(c) were recorded as ₹ 25,000.

Raghu’s A/c             Dr. 5,000

To Purchases A/c     5,000

(d) were posted to Raghav’s account.

Raghav’s A/c     Dr. 20,000

To Raghu’s A/c   20,000

(e) were recorded through sales book.

Sales A/c         Dr. 20,000

Purchases A/c Dr. 20,000

To Raghu’s A/c 40,000

7. Goods returned to Rahim ₹ 1,000 were recorded through sales book.

Sales A/c           Dr. 1,000

To Return Outwards A/c 1,000

8. Credit purchases from S & Co. ₹ 8,000 were recorded through sales book.

Purchases A/c   Dr. 8,000

Sales A/c           Dr. 8,000

To S & Co.’s A/c 16,000

9. Salary paid ₹ 2,000 was debited to employee’s personal account.

Salary A/c          Dr. 2,000

To Employee’s personal A/c 2,000

10. Wages paid for installation of Machinery ₹ 600 was posted to wages account.

Machinery A/c     Dr. 600

To Wages A/c     600

11. Repairs to Machinery ₹. 400 debited to Machinery account.

Repairs A/c         Dr. 400

To Machinery A/c 400

12. Repairs paid for the overhauling of second hand machinery purchased ₹ 1,000 was debited to Repairs account.

Machinery A/c     Dr. 1,000

To Repairs A/c         1,000

13. Own business material ₹ 8,000 and wages ₹ 2,000 were used for construction of building. No adjustment was made in the books.

Building A/c            Dr. 10,000

To Purchases A/c   8,000

To Wages A/c        2,000

14. Old machinery sold to Karmjit at its book value of ₹ 2,000 was recorded  through sales book.

Sales A/c                 Dr. 2,000

To Machinery            2,000

15. Goods withdrawn by Satish for personal use ₹ 500 were not recorded in the books.

Drawings A/c            Dr. 500

To Purchases A/c       500

16. Discount allowed to Ram ₹50 on receiving ₹ 2,050 from him was not recorded in the books.

Discount allowed A/c Dr. 50

To Ram A/c                50

17. Discount received from Mohan ₹ 50 on paying ₹ 3,250 to him was not posted at all.

Mohan’s A/c             Dr. 50

To Discount received A/c 50

18. ₹ 700 received from Garima a debtor, whose account had earlier been written-off as bad, were credited to her personal account.

Garima A/c               Dr. 700

To Bad debts recovered A/c 700

19. Cheque for ₹ 5,800 received from Arzoo in full settlement of her account of ₹ 6,000, was dishonoured. No entry was passed in the books on dishonour of the cheque.

Arzoo A/c               Dr. 6,000

To Bank A/c                 5,800

To Discount Allowed A/c 200

20. ₹ 800 received from Khurshid, whose account had previously been written off as bad, was credited to his account.

Khurshid A/c          Dr. 800

To Bad debts recovered A/c 800

21. Credit sales to Manish for ₹ 5,000 was recorded through the purchases book as ₹ 2,000.

Manish’s A/c            Dr. 7,000

To Purchases A/c          2,000

To Sales A/c                  5,000

22. Goods returned by Natwar ₹ 3,000 were taken into stock. No entry was recorded in the books.

Sales Return A/c    Dr. 3,000

To Natwar A/c             3,000

Rectification Of Double-Sided Errors ends here...

Effect of Rectification of Errors

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1. If the rectification involves Debit to an Expense account/Loss/Revenue/Income/Gain account: It will increase Loss or decrease Profit.
2. If the rectification involves Credit to an Expense account/Loss/Revenue/Income/Gain account: It will increase Profit or decrease Loss.

In the following cases:

1. Rohan’s A/c                 Dr. 10,000

                  To Sales A/c                           10,000

2. Khurshid A/c        Dr. 800

                    To Bad debts recovered A/c 800

3. Garima A/c               Dr. 700

                       To Bad debts recovered A/c 700

4. Machinery A/c     Dr. 600

                       To Wages A/c 600

In these cases, Profit will increase.

1. Salary A/c          Dr. 2,000

                To Employee’s personal A/c 2,000

2. Purchases A/c        Dr. 10,000

                To Raghu’s A/c       10,000

In these cases, Profit will decrease.

1. Manmeet A/c           Dr. 1,000

          Suspense A/c           Dr. 3,000

               To Mannat A/c           4,000

In the above mentioned case, no effect on profit.

Effect of Rectification of Errors ends here...

Trial Balance

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