Errors and Their Rectification part 1

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As we are human beings it is very common to make mistakes while recording transactions because of tiredness. The errors which are occurred during recording are called as ‘Accounting Errors’. Those errors may result disagreement in trial balance. Sometimes both sides of trial balance may tally but there might be an error of omission of the transactions. As soon as these errors are detected, they need to be corrected. For this we need to locate those errors and need to analyze to rectify them.

Types of accounting errors and rectification

Types of Accounting Errors and Rectification

Types of accounting errors and rectification

Accounting errors may take the following forms –

  • Omission of business transaction in the original books.

  • Recorded transactions in journals might not transfer to the respective ledger accounts.

  • Mistakes happen during transferring of forward balances.

  • Mistakes in totaling of credit side and debit side.

  • Mistakes in recording amount wrongly, writing in a wrong account or on the wrong side of the account.

To avoid above mentioned errors first of all we need to locate the errors.

Locating Errors:

Image of Meaning of Rectification of Error

Image of Meaning of Rectification of Error

Image of Meaning of Rectification of Error

Typically, there are two types of accounting errors.

  1. That causes the disagreement of trial balance (both sides of trial balance are not equal)

  2. Errors which do not affect the agreement of Trial Balance (both sides of trial balance are equal but error may be because of some other factor)

Locating Errors when the Trial Balance Does Not Agree:

These errors will result disagreement in Trial Balance (Both sides of trial balance are not equal).

Following steps need to be taken to locate such errors –

  • Check the columnar totals of the Trial Balance carefully.

  • Check the balances of all accounts in the ledger and make sure all figures in the ledgers are correct (both debit side and credit side of the accounts).

  • Find the exact amount of difference in trial balance and see that

    • No account of similar balance has been omitted to be shown in the trial balance

    • A balance amount which is half of the amount f difference amount but is written on the wrong side of the trial balance.

  • Recheck the totals of Special Purpose Books.

  • If error is still not traced, check each and every entry in journals, ledgers and trial balance.

Locating Errors when the Trial Balance Agree:

Sometimes both sides of trial balance may be balanced (both debit side and credit side are equal) but error may be because of some other factor.

Following are the steps need to be taken to locate such errors –

  • Omission of transactions during recording in journals or special purpose books.

  • Recording a wrong amount of an item in journal on both sides.

  • Posting of correct amount but in wrong side i.e. posting debit side instead of credit side.

  • Posting the correct amount on the correct side but in wrong account.

  • An item of Capital Expenditure may be recorded as an item of Revenue expenditure vice-a-versa.

After locating the errors we need to classify them accordingly in order to make rectifications.

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