Accounting Error Assets purchased Recorded as Goods Purchased

 

Two sided error before preparing trial balance

When an error affects two sides, it is known two sided errors.

This type of error needs journal entry to rectify.

Such error affects two side, debit and credit.

Double entry system of bookkeeping is applied for this error.

Procedures for two sided errors before preparing trial balance are given below:

Step 1:       write correct entry of the transaction,

Step 2:       write wrong entry of the transaction,

Step 3:       write correct entry as it is,

Step 4:       change wrong entry (debit entry to credit and credit entry to debit),

Step 5:       find out rectified journal entry.

 

Assets purchased recorded as goods (inventory, merchandise) purchased and vice versa

Assets help to generate profit.

They are purchased not to resell but goods are purchased for reselling.

This error is due to hurry in work or bookkeeper does not know the actual rule to record the transaction.

 

 Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

PROBLEM: 7

Following transaction is given to you (before preparing trial balance):

Machinery purchased from DK Suppliers, was entered through purchase account $/₹/Rs 150,000.

Required: Rectified journal entry

[Answer: Credited purchase by 150,000]

SOLUTION:

Given and working note:

Step 1,				÷	Step 2,
Correct entry
Machinery                       To DK Suppliers	Dr	150,000	150,000		Purchase           To DK Suppliers	Dr	150,000	150,000

Again, correct entry just copy and paste but wrong debit entry credited and wrong credit entry debited

Step 3,					Step 4,
Correct entry				x	Wrong entry
Machinery                       To DK Suppliers	Dr	150,000	150,000		DK Suppliers           To Purchase	Dr	150,000	150,000

Next

Rectified Journal Entry

Date	Particulars		LF	Amount Dr	Amount Cr
	Machinery account           To Purchase account (Being- machinery purchased wrongly debited to purchase account, now rectified)	Dr		150,000	150,000

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

PROBLEM: 7B

Asset purchased wrongly recorded as goods purchase and other account

Following extracted information is given to you (before preparation trial balance):

(a) Land purchased by cheque for Rs 8,25,000 has been debited to purchase account.

(b) Credit machine purchased of Rs 8,325 wrongly recorded as purchased in cash.

Required: Rectified journal entries

 

(a) Given and working note:

Step 1,				÷	Step 2,
Correct entry					Wrong entry
Land           To Bank	Dr	825,000	825,000		Purchase           To Bank	Dr	825,000	825,000

Again, correct entry just copy and paste but wrong debit entry credited and wrong credit entry debited

Step 3,					Step 4,
Correct entry				x	Wrong entry
Land           To Bank	Dr	825,000	825,000		Bank           To Purchase	Dr	825,000	8,25,000

 

(b) Given and working note:  

Step 1,				÷	Step 2,
Correct entry					Wrong entry
Machine                To Creditor	Dr	8,325	8,325		Machine           To Cash	Dr	8,325	8,325

Again, correct entry just copy and paste but wrong debit entry credited and wrong credit entry debited

Step 3,					Step 4,
Correct entry				x	Wrong entry
Machine                To Creditor	Dr	8,325	8,325		Cash           To Machine	Dr	8,325	8,325

 Step 5,

Rectified Journal Entry

Date	Particulars		LF	Amount Dr	Amount Cr
(a)	Land account           To Purchase account (Being- land purchased wrongly recorded as goods purchased, now rectified)	Dr		825,000	825,000
(b)	Cash account           To Creditor (Being- machine purchased on credit wrongly recorded  as purchased in cash, now rectified)	Dr		8,325	8,325

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PROBLEMS  AND  ANSWERS

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

Basic Problem: 7

Asset purchased wrongly recorded as goods purchase and other account

Following extracted information is given to you (before preparation trial balance):

(a) Plant purchased for Rs 525,640 has been debited to purchase account.

(b) Furniture purchased from SP Furniture Rs 8,325 wrongly recorded in purchase account.

(c) Equipment purchased from Machine House was considered as purchased in cash Rs 38,264.

(d) Computer purchased on credit Rs 31,525 was recorded as goods purchased in cash.

Required: Rectified journal entries

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