RECTIFICATION OF ERRORS

Classification of Errors
Keeping in view the nature of errors, all the errors can be classified into the following in four
categories:
• Errors of Commission
• Errors of Omission
• Errors of Principle
• Compensating Errors
ERRORS OF COMMISSION
These are the 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. Such an error by definition is of clerical nature and
most of the errors of commission affect in the trial balance.
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) errors of complete omission
(ii) errors of partial omission
ERRORS OF COMPLETE 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 ₹. 10,000, not entered in the sales book.
ERRORS OF PARTIAL OMISSION - When the recording of transaction s is partly omitted
from the books, 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.
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. This is very important because it will have an impact on
financial statements. It may lead to under/over stating of income or assets or liabilities, etc.
ERROR OF COMPENSATING
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.
.
 RECTIFICATION OF ERRORS
From the point of view of rectification, the errors may be classified into the Following into two
categories:
(a) errors which do not affect the trial balance.
(b) errors which affect the trial balance.
This distinction is relevant because the errors which do not affect the trial balance usually take
place in two accounts in such a manner that it can be Easily rectified through a journal entry
whereas the errors which affect the trial balance usually affects one account and a journal entry
is not possible for Rectification unless a suspense account has been opened.
RECTIFICATION OF ERROR WHICH DO NOT AFFECT THE TRIAL BALANCE-
These errors are committed in two or more accounts. Such errors are also known As two sided
errors. They can be rectified by recording a journal entry giving the Correct debit and credit to
the concerned accounts.
The rectification process essentially involves:
• Cancelling the effect of wrong debit or credit by reversing it; and
• Restoring the effect of correct debit or credit.
For this purpose, we need to analyse the error in terms of its effect on the Accounts involved
which may be:
(i) Short debit or credit in an account; and/or
(ii) Excess debit or credit in an account.
Therefore, rectification entry can be done by:
(i) Debiting the account with short debit or with excess credit,
(ii) Crediting the account with excess debit or with short credit.
The procedure for rectification for such errors is explained with the help of Following
examples:
(a) Credit sales to Mohan ₹. 10,000 were not recorded in the sales book. This is an error of
complete omission. Its affect is that Mohan’s account has not been debited and Sales account
has not been credited. Accordingly, recording usual entry for credit sales will rectify the error.
____________________________________________________________________
MOHAN’s A/C Dr. 10,000
TO SALE’s A/C 10,000
___________________________________________________________________________
RECTIFICATION OF ERROR WHICH AFFECT THE TRIAL BALANCE –
The errors which affect only one account can be rectified by giving an explanatory note in the
account affected or by recording a journal entry with the help of the Suspense Account. such
errors are error of casting; error of carrying forward; error of balancing; error of posting to
correct account but with wrong amount ; error of posting to the correct account but on the
wrong side ; posting to the wrong side with the wrong amount; omitting to show an account in
the trial balance . Take for example a case where Shyam’s account was credited short by Rs.
190. This will be rectified by an additional entry for ₹.190 on the credit side of his account as
follows
Date Particulars J.f Amount Date Particular J.f Amount

Difference in
amount posted 190
short on.....

Take another example, purchases book was under cast by ₹. 1,000. The effect of this entry is
on purchases account (debit side) where the total of purchases book is posted
Date Particulars J.F Amount Date Particulars J.F Amount

Under casting
purchases 1,000
book for the
month of....

SUSPENSE ACCOUNT
Even if the trial balance does not tally due to the existence of one sided errors, accountant has
to carry forward his accounting process prepare financial statements. The accountant tallies
his trial balance by putting the difference on shorter side as ‘suspense account’.
EXAMPLE OF SUSPENSE ACCOUNT
Q1) Rectify the following errors assuming that a suspense account was opened ascertain the
difference in trial balance
(i) Credit sales to Arun ₹. 7,000 were posted to credit of his account
(ii) Credit purchase from Brij ₹. 9,000 were posted to the debit of his account as ₹.6,000
(iii) Goods returned to Charu ₹.8000 were posted to the credit of her account
(iv) Goods retuned from Deepika ₹. 1,000 were posted to the debit of her account as ₹.
2,000
(v) Cash sales ₹. 2,000 were posted to the debit of sales account as ₹.5,000
ANS 1)
Date Particulars L.F Amount Amount
Dr. Cr.

(i) Arun A/c Dr. 14,000

TO Suspense A/c 14,000
(Credit sales to arun wrongly credited to his
account ,NOW RECTIFIED )
________________________
15,000
(ii) Suspense A/c Dr. 15,000
TO Brij A/c
(Credit purchase from brij Rs. 9,000 wrongly
debited to his account as Rs.6,000, NOW
RECTIFIED)
________________________
(iii)
Charu A/c Dr. 8,000
TO Suspense A/c 8,000
(Goods returned to charu wrongly credited to her
account , NOW RECTIFIED

(iv) Suspense A/c Dr. 3,000

TO Deepika A/c 3,000
(Goods returned from deepika Rs. 1,000
wrongly debited to her account as Rs. 2,000
,NOW RECTIFIED)
_________________________
(v) Suspense A/c Dr. 7,000
TO Sales A/c 7,000
(Cash sales Rs. 2,000 wrongly debited to sales
account as Rs. 5,000,NOW RECTIFIED)

SUSPENSE A/C
Dr. Cr.
PARTICULARS L.F AMOUNT PARTICULARS L.F AMOUNT
TO Brij 15,000 By Charu 14,000
TO Deepika 3,000 By Arun 8,000
TO Sales 7,000
___________ ___________
25,000 22,000
By balance c/d 3,000
_____________
TO balance b/d 3,000 25,000
SOME QUESTIONS FOR PRACTICE

Q1) Rectify the following errors:

Credit purchases from Raghu Rs. 20,000
(i) Were not recorded.
(ii) Were recorded as Rs. 10,000.
(iii) Were recorded as Rs 25,000.
(iv) Were not posted to his account.
(v)
(vi) Were posted to Raghav’s account.
(vii) Were posted to the debit of Raghu’s account.
(viii) Were posted to the debit of Raghav.
(ix) Were recorded through sales book.
Q2) Trial balance of Anurag did not agree. It showed an excess credit Rs. 10,000. Anurag put
the difference to suspense account. He located the following errors:
(i) Sales return book over cast by Rs.1, 000.
(ii) Purchases book was undercast by Rs. 6,00
(iii) Goods returned to Ram Rs. 1,000 were recorded through sales book.
(iv) Credit purchases from M & Co. Rs. 8,000 were recorded through sales book.
(v) Salary paid Rs. 2,000 was debited to employee’s personal account.
Q3) TICK THE CORRECT
I) Agreement of trial balance is affected by:
(a) One sided errors only.
(b) Two sided errors only.
(c) Both (a) and (b).
(d) None of the above.

II) Which of the following is not an error of principle

(a) Purchase of furniture debited to purchases account.
(b) Repairs on the overhauling of second hand machinery purchased debited to repair
account
(c) Cash received from Manoj posted to Saroj.
(d) Sale of old car credited to sales account.

III) Which of the following is not an error of commission:

(a) Over casting of sales book.
(b) Credit sales to Ramesh Rs. 5,000 credited to his account.
(c) Wrong balancing of machinery account.
(d) Cash sales not recorded in cash book.
VI) If suspense account does not balance off even after rectification of errors it implies
that
(a) There are some one sided errors only in the books yet to be located.
(b) There are no more errors yet to be located.
(c) There are some two sided errors only yet to be located.
 (d) There may be both one sided errors and two sided errors yet to be located.
Q4) Give two examples of errors of principle?
Q5) Give two examples of errors of commission?
Q6) what is a suspense account? Is it necessary that is suspense account will? Balance off after
rectification of the errors detected by the accountant? If Not, then what happens to the balance
still remaining in suspense account?
Q7) Rectify the following errors:
(i) Credit sales to Mohan Rs.7,000 were not recorded
(ii) Credit purchases from Rohan Rs. 9,000 were not recorded.
(iii) Goods returned to Rakesh Rs. 4,000 were not recorded.
(iv) Goods returned from Mahesh Rs. 1,000 were not recorded.
Q8) Rectify the following errors:
(i) Salary paid Rs. 5,000 was debited to employee’s personal account.
(ii) Rent Paid Rs. 4,000 was posted to landlord’s personal account.
(iii) Cash received from Kohli Rs.2,000 was posted to Kapur’s account.
(iv) Cash paid to Babu Rs. 1,500 was posted to Sabu’s account.
Q9) Rectify the following errors and ascertain the amount of difference in trial balance by
preparing suspense account:
(i) Credit sales to Mohan Rs. 7,000 were posted as Rs. 9,000.
(ii) Credit purchases from Rohan Rs.9,000 were posted as Rs.6,000.
(iii) Goods returned to Rakesh Rs. 4,000 were posted as Rs. 5,000.
(iv) Goods returned from Mahesh Rs.1,000 were posted as Rs. 3,000.
(v) Cash sales Rs. 2,000 were posted as Rs. 200
Q10) Rectify the following errors assuming that suspension account was opened. Ascertain
the difference in trial balance.
(I) Furniture purchased for ₹ 10,000 wrongly debited to purchase account as ₹ 4,000
(II) Repairs on machinery ₹ 1,400 debited to Machinery account as ₹ 2,400
(III) . Repairs on overhauling of second hand machinery purchased ₹ 2,000 was debited
to Repairs account as ₹ 200.
(IV) Sale of old machinery at book value ₹ 3,000 was credited to sales account as
Rs.5,000
Q11) Trial balance of Anuj did not agree. It showed an excess credit of ₹ 6,000. He put the
difference to suspense account. He discovered the following error
(I) Cash received from Ravish ₹ 8,000 posted to his account as ₹ 6,000.
(II) Returns inwards book overcast by ₹ 1,000.
(III) Total of sales book ₹ 10,000 was not posted to Sales account.
(IV) Credit purchases from Nanak ₹ 7,000 were recorded in sales Book. However,
Nanak’s account was correctly credited
(V) Machinery purchased for ₹ 10,000 was posted to purchases account as ₹ 5,000.
Rectify the errors and prepare suspense account
Rectify the errors and prepare suspense account to ascertain the difference in trial balance.
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