Errors should not be corrected by erasing or overwriting. It reduces the authenticity of accounting records. Method of rectification depends on the stage at which it is detected. In case an error is detected in the book of original entry before its posting to the ledger, it may be neatly corrected by crossing out the wrong figure by a single line and writing the correct figure above the crossed figure. In case, a wrong amount has been entered in the correct ledger account, it may be corrected in the same manner.
But when error is located after sometime, it should be corrected by passing a suitable journal entry. It is called rectifying entry.
All the errors can be classified in to the following categories :(i) Two sided errors.
(ii) One sided errors.
Two sided errors
Those errors which affect two accounts, at the same time, are known as two sided errors. This type of errors may be on account of the following reasons:
(a) Posting to the wrong account.
(b) Wrong recording of transaction in the books of original record.
(c) Omission to pass an entry in the subsidiary books or journal.
(d) Errors of principle.
This type of errors are rectified by passing a journal entry. One account is debited and the other account is credited. Following rules help in rectifying such errors :
(i) The account showing an excess debit should be credited in the rectifying entry.
(ii) The account showing a short debit should be debited in the rectifying entry.
(iii) The account showing an excess credit should be debited in the rectifying entry.
(iv) The account showing a short credit should be credited in the rectifying entry.
The four rules mentioned in the forgoing lines have been explained as follows giving suitable examples :
When an account has wrongly been debited in place of another account:
Example : Land purchased for Rs. 80,00,000 has been debited to purchases account.
Solution : This error affects the two accounts as follows :
Land A/c Purchases A/c
Short by Excess by
Rs. 80,00,000 Rs. 80,00,000
(This account (This account
should have was debited
been debited) by mistake)
While rectifying this mistake, Land A/c will be debited because it was not debited earlier and the purchases account will be credited because it was wrongly debited.
Rectifying Entry
Land A/c Dr 80,00,000
To Purchases A/c 80,00,000
(Being purchase of land wrongly debited to purchases account, now rectified)
(ii) When an account has wrongly been credited in place of another account:
Example : Rs. 90,00,000 being the sales proceeds of land have been credited to sales account.
Solution : This error effects the two accounts in the following manner :
Land A/c Sales A/c
Short by Excess by
Rs. 90,00,000 Rs. 90,00,000.
(This account (This account was should have been credited by mistake)
credited)
While rectifying mistake, sales A/c will be debited because it was credited by mistake and the, and account will be credited because it was not credited.
Rectifying Entry
Sales A/c Dr 90,00,000
To Land A/c 90,00,000
(Being sale of land wrongly credited to Sales A/c, now rectified)
(iii) When there short debit in one account and short credit in another account:
Example : Goods purchased from Divya for Rs. 25000 was entered in purchases book as Rs. 2500 only.
Solution : Effect of Error
Dr Purchases A/c Sanjay A/c Cr
Short by Rs. 22500 Short by Rs. 22500
While rectifying this mistake purchases account will be debited by Rs. 22500 because it has been debited short and Divya’s A/c will be credited because it has been credited by a lesser amount.
Rectifying Entry
Purchases A/c Dr 22,500
To Divya 22,500
(Being goods purchased from Divya wrongly entered as Rs. 2,500, now rectified)
(iv) When there is an excess debit in one account and an excess credit in another account :
Example : Goods sold to Lagan worth Rs. 60,000 on credit was recorded in sales book as Rs. 6,00,000
Solution : Effect of error :
Lagan Sales A/c
debited Credited
Excess by Rs. 5,40,000 Excess by
(Rs. 6,00,000–Rs. 60,000) Rs. 5,40,000 (Rs. 600,00– Rs. 60,000- Rs. 5,40,000)
While rectifying this mistake, Lagan will be credited by Rs. 5,40,000 because he has been ‘excess debited’ by a similar amount and sales account will be debited by Rs. 5,40,000 because it has been ‘excess debited’ by a similar amount.
Rectifying Entry
Sales A/c Dr 5,40,000
To Lagan 5,40,000
(Being sales to Lagan for Rs. 60,000 wrongly credited as Rs. 6,00,000, now rectified)
One sided errors
One sided errors affect one account only. Suppose an amount of Rs. 80,000 given to Bhavya is correctly entered in the cash book but omitted to be posted to the debit of Bhavya, the error will be termed as one sided error since the error is in the ledger account of Bhavya only.
Such type of errors occurr in the following cases:
(i) When the posting is made with the wrong amount.
(ii) When the posting is made on the wrong side of an account.
(iii) When a subsidiary book is undercast or overcast (totalled less or more).
(iv) When the posting to an account is altogether omitted.
Rectification of this type of errors depends on the stage at which they are located.
When the errors are located and rectified before the closing of accounts: Rectification of such errors does not need rectification entries. Only the amount is written on the debit or credit side of the account which is affected by the errors. In case the total of the purchases book for the month of April is undercast by Rs. 9000. In order to rectify this error, a sum of Rs. 9000 will be put on the debit side of the purchases account by writing the words, ‘To undercasting of purchases book for the month of April.’
On the other hand if the total of sales book for the month of June is undercast by Rs. 25000, the rectifying entry will be put on the credit side of sales account by writing the words, ‘By undercasting of sales account.
When the errors are detected and rectified after the closing of accounts : In case one sided errors are located after the preparation of trial balance rectifications are done by making journal entries. Since one account is to be debited or credited for the rectification of one sided errors suspense account is opened to complete the double entry.
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