It is saying, ‘To err is human.’ It means human being does mistake.
The mistakes may be while recording, casting, carrying forward, posting and summarising the financial transactions.
Various types of errors are possible while maintaining the books of accounts.
Some of them are detected by trial balance.
But some errors cannot be detected from trial balance.
Generally, trial balance is the base to check arithmetical accuracy.
If the trial balance does not have equal debit and credit totals, there is an error somewhere in the records.
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When errors are discovered in the books of account, they are corrected by journal entries in concerned accounts.
Crossing and erasing of errors are not practiced because they reduce the legal values of accounts.
It also makes them dirty.
The correction of errors is journalized in systematic manner by passing a special entry in the journal proper.
It is known as rectification of errors.
Before preparing the rectification entry, one should identify the errors of account.
The following steps are to be followed to identify the errors:
Steps to be followed in locating the errors
Check the debit totals and credit totals of trial balance and ascertain the difference between them if any.
Find out that different amount. Otherwise,
Divide the difference amount by 2 in order to find out the balance of same amount in the trial balance.
Also check whether any amounts have been posted twice in the trial balance.
Multiply the difference amount by 2 in order to find out the balance of same amount in the trial balance.
If the second and third step fails to locate the errors, a transposition error may have occurred.
Such as $/₹/Rs 7,200 is recorded instead of $/₹?Rs 2,700. Divide the difference by 9.
If the difference figure is divisible by 9 without remainder, it is a transposition error.
Check the balances of all ledger accounts including are included in the trial balance or not.
Check whether the opening balances have been carried forward correctly.
Compare the current year’s trial balance with that of previous year in case of large difference between debit and credit totals.
If above techniques fail to identify the errors, recheck the totals of subsidiary books, posting from journal and subsidiary books, balances extracted from ledger accounts, casting of ledger balances and recheck whole prime entry as required.
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ACCOUNTING EQUATION http://tiny.cc/c89jkz
BASIC JOURNAL ENTRIES IN NEPALI http://tiny.cc/uaakkz
BASIC JOURNAL ENTRIES http://tiny.cc/8aakkz
JOURNAL ENTRY AND LEDGER http://tiny.cc/caakkz
SUBSIDIARY BOOK http://tiny.cc/399jkz
CASH BOOK http://tiny.cc/889jkz
TRIAL BALANCE & ADJUSTED TRIAL BALANCE http://tiny.cc/c59jkz
BANK RECONCILIATION STATEMENT (BRS) http://tiny.cc/q59jkz
FINAL ACCOUNT: CLASS 11 http://tiny.cc/y89jkz
ADJUSTMENT IN FINAL ACCOUNT http://tiny.cc/keakkz
CAPITAL AND REVENUE http://tiny.cc/peakkz
SINGLE ENTRY SYSTEM http://tiny.cc/n19jkz
NON-PROFIT ORGANIZATION (NON-TRADING CONCERN http://tiny.cc/j09jkz
GOVERNMENT ACCOUNTING http://tiny.cc/hcakkz
GOSWARA VOUCHER (JOURNAL VOUCHER) http://tiny.cc/hcakkz
In the question, there are two types of errors; they are:
Rectification of error before preparation of trial balance.
Rectification of error after preparation of trial balance.
Both before and after have same rule except suspense account.
If errors are located before preparation trial balance, we should write cash account in rectified entry.
But, if errors are located after preparation trial balance, we should write suspense account in place of cash.
If errors are located before preparing trial balance, there are two types of errors:
One sided error
Two sided error
In one sided error, only one account is affected.
Therefore, no need to prepare journal entries.
Rectification can be made by making additional posting in effected side of the ledger or writing only in particulars of Journal entries.
Some examples of one sided errors are:
Wrong totalling of subsidiary book.
Wrong amount posting.
Posting in wrong side etc.
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