Effect of Rectification of Errors
- If the rectification involves Debit to an Expense account/Loss/Revenue/Income/Gain account: It will increase Loss or decrease Profit.
- 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:
- Rohan’s A/c Dr. 10,000
To Sales A/c 10,000
- Khurshid A/c Dr. 800
To Bad debts recovered A/c 800
- Garima A/c Dr. 700
To Bad debts recovered A/c 700
- Machinery A/c Dr. 600
To Wages A/c 600
In these cases, Profit will increase.
- Salary A/c Dr. 2,000
To Employee’s personal A/c 2,000
- Purchases A/c Dr. 10,000
To Raghu’s A/c 10,000
In these cases, Profit will decrease.
- 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.