Rectification of Errors

Rectification of Errors

Types of errors

1. Errors of Principles- These errors arise because of wrong application of accounting principles and failure to differentiate between capital and revenue and capital expenditure.

Examples- Wages paid for erection of machinery but wrongly debited to Wages A\C . Sale of an asset but wrongly entered in sales book. Purchase of an asset but wrongly entered in purchases day book etc.

Registration charges paid for a land but wrongly debited to Legal Expenses A\C.

2. Compensating Errors- These are a group of errors, the total effect of which are not reflected in the Trial Balance.

3. Errors of Commission- If an amount is recorded on the wrong side or in wrong account or the totals are wrong or a wrong balance is struck, it will be a case of error of commission.

4. Errors of Omission- If a transaction is completely or partly is omitted to be recorded, it is called error of omission.

Stages of Rectifying Errors

1. Rectification before preparation of Trial Balance.

2. Rectification after preparation of Trial Balance.

3. Rectification after preparation of Final Accounts.

Notes- 1. In case of rectification of a single sided error, before preparation of Trial Balance, no entry is required is required, just a note called Blank Entry is written.

2. In case of rectification of a single sided error, after preparation of Trial Balance, Suspense A\C is opened to give effect double entry system.