Rectification of errors for class XI

help to understand the topic of rectification of errors in accountancy for students of class XI

1. Rectification of Errors Accountancy Class XI N.K.Verma

2. What to learn Meaning of Rectification Types of Rectification- i . Two sided Errors ii. One sided Errors Suspense Account Utility of suspense Account Rectification through suspense account Disposal of suspense account

3. Meaning of Rectification Mistakes are the result of activities. If we do something we make a mistake . Errors in accounting are result of ignorance of accounting Rules (knowingly and unknowingly) . We cannot use alteration of accounts as it may lead to lack in reliability of accounts. If a correction is seen after a gap of time any alteration to it may lead to disturbance of all accounting entries made after that.

4. Rectification Rectification depends on stage when the errors are rectified:- If the error is traced before posting to the Ledger, it may be corrected by neatly crossing out the wrong figure by a single line and writing the correct figure above the crossed figure. Even if a wrong figure is posted in the ledger accounts, may be corrected in the same manner. If an error is traced after some time it should be corrected by passing a suitable Journal entry, called the rectifying entry

5. Types of Rectification- Two sided Errors (which do not affect Trial Balance) These errors affect two accounts together. Omission to pass an entry Wrong recording of a transaction Posting to the wrong account Errors of principle These errors can be rectified just by passing a Journal entry (with debit of one account and crediting the other) Now we will discuss the rules to be observed while passing the entries to rectify these errors

6. The account showing an excess debit should be credited in the rectifying entry. The account showing short debit should be debited in the rectifying entry. The account showing an excess credit should be debited in the rectifying entry. The account showing the short credit should be credited by the rectifying entry.

7. Machinery purchased for Rs. 10,000 has been debited to Purchases A/c Rectifying Entry : Method one : Machinery A/c Dr. 10,000 To Purchase A/c 10,000 ( For purchase of machinery wrongly debited to Purchase A/c) Method Two: Actual entry that was to be passed Machinery A/c Dr. 10,000 To Cash 10,000 Entry which is actually passed Purchases A/c Dr. 10,000 To Cash 10,000 Correction that has to be made with net impact is Machinery A/c Dr. 10,000 To Purchase A/c 10,000 ( For purchase of machinery wrongly debited to Purchase A/c)

8. Types of Rectification- One sided Errors (which affect Trial Balance) These errors affect only one account When a subsidiary book is undercast ( totalled less) or overcast ( totalled in excess) When posting to an account is altogether omitted When the posting is made on the wrong side of an account When the posting of a wrong amount is done Rectification of these errors can be done in accordance with the time of rectification i.e. When the errors are located before the closing of accounts. When the errors are located after the closing of accounts.

9. When the errors are located before the closing of accounts. Rectification at this stage does not required rectification entries. Only the amount need to be adjusted in the account just by writing the amount on debit side or credit side of the account which is affected by the error. Examples:

10. When the errors are located after the closing of accounts. (Errors located and rectified after the closing of accounts) These errors are corrected by passing journal entries. As only one account is affected a suspense A/c is used to complete the entries.

11. MEANING WHEN THE TRIAL BALANCE IS NOT TALLIED WITH BEST EFFORTS A NEW ACCOUNT IS OPENED AND IS NAMED AS SUSPENSE ACCOUNT. THIS IS DONE TO AVOID DELAY IN ACCOUNTING PROCESS(PREPARATION OF FINAL ACCOUNTS) IF DEBIT SIDE OF TRIAL BALANCE EXCEEDS CREDIT SIDE THE BALANCE IS PUT ON THE CREDIT SIDE AND VICE VERSA.

12. DISPOSAL OF SUSPENSE ACCOUNT Suspense account is an imaginary account. It is used as a temporary measure It is used to reconcile a trial balance It ends with the location of errors. To dispose rectification entries are passed with the help of suspense account.

13. Point to be noted for rectification entries Suspense account is created for those entries which affect the trial balance. If the account which is to be rectified is debited in the rectifying entry, suspense account will be credited to complete the correct entry and vice versa.

14. Questions on the topic

15. Wages paid to Mohan for erecting a machine should be debited to A) wages A/c B) Machine A/c. C) Mohan A/c D) Cash A/c

16. Sale of typewriter that has been used in the office should be credited to A) Sales A/c B) Cash A/c C) Capital A/c D) Typewriter A/c.

17. Suspense A/c in the trial balance will be entered in the Manufacturing A/c Trading A/c Profit & Loss A/c Balance Sheet.

18. Rs. 1500 received from Bahadur whose account was previously written as a Bad debt should be credited to Bahadur A/c Bad debt recovered A/c. Suspense A/c Cash A/c

19. Rent paid to landlord amounting to Rs. 500 was credited to Rent A/c with Rs. 5000. In the rectifying entry rent A/c will be debited with 5000 500 5500. 4500

20. Purchased goods from Gopal for Rs. 3600 but recorded as Rs. 6300 to the debit of Gopal . Gopal A/c will be debited with 9900 2700. 3600 6300

21. Purchased goods from Gopal for Rs. 3600 but recorded 6300 to the debit side of Gopal . Gopal A/c will be credited with 9900. 2700 3600 6300

22. Suspense A/c is Real a/c Personal a/c Nominal a/c Any of these.

23. Errors are Undetected mistakes Intentional mistakes Frauds Unintentional mistakes.

24. A watch purchased for Rs. 800 for the son of a partner was debited to gen. exp. A/c with Rs. 80. in the rectifying entry drawings a/c will be debited with 880 720 800. 80

25. The end