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Rectification of Errors

The document discusses the rectification of accounting errors in three stages: before preparing the trial balance, after the trial balance but before final accounts, and after final accounts. Errors are either one-sided, requiring an adjustment to one account, or two-sided, requiring a journal entry to record the correct transaction and cancel out the incorrect entry. Two-sided errors are rectified by writing the correct and incorrect entries, then passing an entry to arrive at the correct balance and cancel the incorrect entry. After final accounts, rectification follows the same process as the second stage.

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Soumendra Roy
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409 views

Rectification of Errors

The document discusses the rectification of accounting errors in three stages: before preparing the trial balance, after the trial balance but before final accounts, and after final accounts. Errors are either one-sided, requiring an adjustment to one account, or two-sided, requiring a journal entry to record the correct transaction and cancel out the incorrect entry. Two-sided errors are rectified by writing the correct and incorrect entries, then passing an entry to arrive at the correct balance and cancel the incorrect entry. After final accounts, rectification follows the same process as the second stage.

Uploaded by

Soumendra Roy
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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RECTIFICATION OF ERRORS

SOUMENDRA ROY NIMS

INTRODUCTION

Accounting errors can result from the following three possibilities


Arithmetical mistakes Failure to apply principles of accounting Misuse or omission of certain information

TYPES OF ERRORS
ERRORS

ERRORS OF OMISSION Complete Error Partial Error

ERRORS OF COMMISSION Errors of Principle Compensating Errors Errors of Posting Errors of Casting

RECTIFICATION OF ERRORS OCCURS IN THREE STAGES

STAGE 1: Before the preparation of the Trial balance STAGE 2: After the preparation of the Trial Balance but before the preparation of the Final Accounts STAGE 3: After the preparation of the Final Accounts

RECTIFICATION OF ERRORS BEFORE THE PREPARATION OF THE TRIAL BALANCE

When errors are detected, it should be assessed whether they are one sided errors or two sided errors ONE-SIDED ERRORS: No journal entry is required to be passed. Only the relevant account in the ledger is to be debited or credited. TWO-SIDED ERRORS:

STEP 1: Write down in the rough sheet the correct entry necessary for recording the transaction STEP 2: Write down in the rough sheet the entry that has actually been passed STEP 3: Pass in the journal, the requisite entry to arrive at the correct entry of Step 1 and to cancel the entry of Step 2

RECTIFICATION OF ERRORS AFTER THE PREPARATION OF THE TRIAL BALANCE BUT BEFORE THE PREPARATION OF FINAL ACCOUNTS

When errors are detected, it should be assessed whether they are one sided errors or two sided errors ONE-SIDED ERRORS: Rectified by passing a Journal entry via Suspense Account TWO-SIDED ERRORS:

STEP 1: Write down in the rough sheet the correct entry necessary for recording the transaction STEP 2: Write down in the rough sheet the entry that has actually been passed STEP 3: Pass in the journal, the requisite entry to arrive at the correct entry of Step 1 and to cancel the entry of Step 2

RECTIFICATION OF ERRORS AFTER THE PREPARATION OF FINAL ACCOUNTS

1.

2.

3.

When errors are detected after the preparation of Final Accounts, the following points should be kept in mind: All the Nominal accounts have been closed, after transferring to Trading Account, or Profit and Loss Account The Suspense Account, if any, has carried forward to the next period Real and Personal Accounts have also been carried forward to the next period Rectification of errors at this stage should be done in the same manner as we do in case of Stage 2

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