Page 186 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I Pooja, Lovely Professional University

Notes Unit 14: Rectification of Errors

CONTENTS

Objectives
Introduction

14.1 Rectification of Errors when Error Affects only one Account
14.2 Rectification of Errors when it Affects both the Accounts

14.3 Rectification of Errors through Suspense A/C
14.4 Summary
14.5 Keywords
14.6 Self Assessment
14.7 Review Questions

14.8 Further Readings
Objectives

After studying this unit, you will be able to:

z Make rectification of errors affecting one account and more than one account
z List the steps to make rectification of errors

z Prepare suspense a/c

Introduction

In unit 10 we discussed about the different types of errors which are disclosed and not disclosed

by trial balance. In this unit you will study about the rectification of errors and their accounting
treatment. The process of rectification starts with understanding the mistakes and their

ramifications. Once the nature of the mistake is comprehended, half the job is done. Having
perceived the nature of the mistake, the accountant has to analyse the implications of the mistake
on the balances of affected accounts as well as on trial balance. An error would have conferred

benefits or imposed detriments to one or more accounts.
Example: Crediting Anand’s account instead of Ahmad’s account bestows an unwarranted

benefit to Anand, but deprives Ahmad of the rightful benefit. In rectification, removing the incorrect

credit given to Anand, by debiting his account with the amount and extending to Ahmad his due
benefit by crediting him with a similar sum meets out justice. In other words, rectifi cation entries

would bring back normalcy in the accounting system by removing wrong credits or debits and
restoring the affected accounts to their legitimate real positions.

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