Rectification of Errors
After Preparation of Trial Balance | Before Final Accounts
Understanding Rectification of Errors
What is Rectification of Errors?
Rectification of errors refers to the process of correcting accounting mistakes discovered after the trial balance has been prepared but before the final accounts are prepared.
When Errors are Discovered:
- After Trial Balance: Errors that affect the agreement of trial balance
- Before Final Accounts: Errors corrected through journal entries
- Suspense Account: Created when trial balance doesn't agree due to one-sided errors
Types of Errors:
Errors that affect only one account (creates trial balance disagreement)
Errors that affect two or more accounts equally (trial balance still agrees)
Wrong Posting of Amount (One-Sided Error)
Problem:
Sales of ₹5,000 to Ramesh were correctly entered in the Sales Book but posted to Ramesh's account as ₹500. Trial balance shows a difference and Suspense Account is created.
Posting on Wrong Side (One-Sided Error)
Problem:
Discount received ₹300 was posted to the debit side of Discount Received Account instead of credit side. Find the difference in trial balance and pass rectification entry.
Partial Recording (One-Sided Error)
Problem:
Purchase of goods ₹8,000 from Suresh was recorded in the Purchase Book but not posted to Suresh's account. Rectify the error.
Posting to Wrong Account (Two-Sided Error)
Problem:
Cash received ₹2,500 from Mohan was credited to Sohan's account. Rectify this error.
Recording Wrong Amount (Two-Sided Error)
Problem:
Salary paid ₹6,000 was recorded as ₹600 in both Cash Book and Salary Account. Rectify this error.
Suspense Account - Detailed Explanation
What is Suspense Account?
A Suspense Account is a temporary account created when the trial balance does not agree due to one-sided errors. It holds the difference until the errors are found and corrected.
When is Suspense Account Created?
- When trial balance totals don't match
- When one-sided errors are present
- When errors need to be located and rectified
Example of Suspense Account Preparation:
| Dr. Side | Cr. Side | ||
|---|---|---|---|
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Difference in Trial Balance | XX | By Error Rectification 1 | XX |
| To Error Rectification 2 | XX | By Error Rectification 3 | XX |
| By Balance c/d (if any) | XX | ||
| Total | XX | Total | XX |
Key Points to Remember
Affect trial balance agreement. Use Suspense Account for rectification.
Trial balance still agrees. No Suspense Account needed.
After trial balance preparation but before final accounts.
All rectifications are done through proper journal entries.