Rectification of Errors

Rectification of Errors

Errors can be classified into two categories for the purpose of rectification of errors-
Rectification of Errors which do not Affect the Trial Balance
–The following errors do not affect the equality of the Trial Balance totals:
–Errors of Omission: A transaction is omitted completely from the books so that there is no debit and credit entry of the transaction, e.g. Drawings of Rs. 5000 cash by the proprietor was not recorded.
Errors of Commission: An entry is posted to the correct side of the ledger but to the wrong account, i.e. items have been posted to the wrong account of the same class, e.g. Payment of Rs. 1000 cash by a customer A. John was wrongly posted to the account of another customer, B. Johan.
Errors of Principle: An entry is made in the wrong class of account, i.e. when an expense is treated as an asset and vice versa, e.g. Repairs to building Rs. 4000 was debited to the Building Account.
Complete Reversal of Entries: An account that should be debited is credited and vice versa, e.g. A cheque Rs. 2000 received from Sunita was debited to the account of Sunita and credited to the Bank Account.
Compensating Errors: Errors (or error) on one side of the ledger are compensated by an error (or errors), e.g. The Purchases Account and Sales Account were both overcast by Rs. 1500.
Errors of Original Entry: The original figure may be incorrectly entered although the correct double-entry principle has been observed using this incorrect figure, e.g. Credit sales of Rs. 9650 to Ranjit was recorded in the Sales Account and Ranjit’s account as Rs. 6950.
–Rectification of Errors which Affect the Trial Balance
–Errors which are revealed by the Trial Balance are those errors which cause the Trial Balance totals to be in disagreement.
Errors in Calculation: If there is any miscalculation of the Trial Balance totals or the net account balances, the Trial Balance will not balance, e.g. There was an error in the calculation of the cash balance, causing the Trial Balance totals not to balance too.
Errors in Omission of One Entry: Omission of either the debit or credit entry of a transaction will cause the totals of the Trial Balance not to agree, e.g. A cheque Rs. 5000 received for commission was debited to the Bank Account only.
–Posting to the Wrong Side of An Account: Entry into the wrong side of an account will cause one side of the ledger to be more than the other, e.g. A cheque of Rs. 8000 paid to creditor, K. Raj was credited instead of debited to his account.
Errors in Amount: If the debit entry of a transaction differs in amount with the credit entry, the Trial Balance will not balance, e.g. Cash Rs. 9650 received from Anand was debited to the Cash Account as Rs. 9650 and credited to the account of Anand as Rs. 6950.
–Summary
–An account has a debit balance when its debit total exceeds its credit total.
–An account has a credit balance when its credit total exceeds its debit total.
–Asset, expenses and drawings accounts have debit balances.
–Liability, capital and revenue accounts have credit balances.
–A Trial Balance is a list of debit and credit balances extracted from the accounts in the ledger at a particular date.
–The Trial Balance is prepared for the purpose of checking the arithmetical accuracy of the entries made in the ledger.
–The total debit balances will equal the total credit balances in the Trial Balance if the double-entry principles of recording have been strictly adhered to.
–Errors that effect the agreement of the Trial Balance totals are wrong calculation of balances, omission of either a debit or credit entry of a transaction, entry on the wrong side of an account, and errors in amount.
–Errors that do not affect the agreement of the Trial Balance totals are complete omission of entries of a transaction, errors of commission, errors in principle, compensating errors, and errors in original entry.
–Asset and liability accounts are balanced and their balances brought down to the next accounting period.
–Personal accounts record transactions with persons who have dealings with the business, e.g. debtors and creditors accounts.

Accounting & Finance for Banking

Principles & Practices of Banking Module E Pdf

Free
Module E PPB ePDFs available in our android app. Get them all at https://iibf.info/app

Accounting and Finance for Banking Module A Pdf

Free
Accounting and finance for bankers all ePDFs are available in our an app. Get them all at https://iibf.info/app

Accounting and Finance for Banking Module A Pdf

Free
Accounting and finance for bankers all ePDFs are available in our an app. Get them all at https://iibf.info/app
Learning Sessionshttps://iibf.info
Btech, JAIIB CAIIB and a tutor. Have taken more than 900+ hours online classes with more than 1,25,000 students

Popular

Free Live Classes

spot_img

More from author

What next after CAIIB? IIBF Certifications at a Glance

What next after CAIIB? 15 Certificate Exams in Finance and Banking useful for Bankers:: Introduction As per the IBA settlement, bankers who have passed JAIIB and CAIIB...

JAIIB Mega Mock Test for Free | Principles and Practices of Banking

ppb mock test:- Jaiib Exam 2020 dates will be announced soon for May 2020 by iibf. It is high time for preparing for all...

JAIIB Study Material Principles and Practices of Banking Live Class Previous Year Questions

https://www.youtube.com/watch?v=BG2s7lPiX9A Jaiib Study Material PDF Notes Papers Mock Tests - In this post you can get JAIIB Study Material PDF files as shared by other...

Principles and Practices of Banking – PPB Most important Questions

Hello friends, today in this article by the learning sessions we will share important questions and memory called topics of PPB that is principles...