Effect of Rectification of Errors

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.