RECTIFICATION OF ERRORS

The term 'error' refers to unintentional mistakes in financial information, e.g. mathematical or clerical mistakes, oversight or misinterpretation of facts, or unintentional misapplication of accounting policies.

 

While recording transactions and events various errors may be committed unintentionally. When a journal entry contains an error, the entry can be erased or crossed out and corrected—if the error IS discovered immediately. However, if the errors are detected after posting to ledger accounts, the correcting entries are made. The correcting entry is recorded in journal and posted to the general ledger exactly as regular entries are.

 

Example:

(i)                       A repair expenses was erroneously debited to Plant and machinery on November 25. The error is discovered on December 31: Corrective Entry: 31st Dec.

Repair Expenses A/c ———— Dr.

                 To Plant and Machinery A/c

The corrective entry shows a credit to plant and machinery to cancel of offset the erroneous debit to plant and machinery.

 

(ii)                     A collection on account was erroneously credited to sales on Jan.1 The error is discovered on Mach 26. Corrective Entry: March 26

Sales Account Dr.

                To sundry Debtors A/c

The debit to Sales in the correcting entry offset the incorrect credit to sales in the erroneous entry. The credit to Account Receivable in the correcting entry places the collected amount where it belongs.

 

Some errors are counter balanced:-- Accounting errors that are undetected can affect a variety of items, including revenues and expenses for a given period. Some errors are counterbalanced by offsetting errors in the ordinary accounting process in the "next period. Such errors misstate net income in both periods, but by the end of the second period the errors are counterbalance, and they affect the balance sheet of only first period, not the second period.



#RECTIFICATIONOFERRORS

Latest Blogs

Salary of a Qualified CMA

Salary of a Qualified CMA

Best Career Option After Class 12th

Best Career Option After Class 12th

Why to choose career in "CMA" ?

The Reasons to Choose a Career in "CMA"

What Is Balance ScoreCard

What Is Balance ScoreCard A balanced scorecard is a strategic management performance metric used to identify and improve various internal business functions and their resulting external outcomes. Balanced scorecards are used to measure and provide feedback to organizations. #BalanceScoreCard

The Importance of Cost Management Accounting

Top Reviews

Introduction to Statistics for CA Foundation

Introduction to Statistics for CA Foundation Business Mathematics, Logical Reasoning and Statistics is designed as per latest CA Foundation syllabus for Paper 3 to provide a firm grounding in the principles, techniques and practice. The book adopts self-study approach and has been written in student-friendly manner. With a blend of conceptual learning and problem-solving approach, it offers in-depth understanding of the basic mathematical and statistical tools. #introductiontostatistics

Chapter X of Companies Act 2013

Chapter X of Companies Act 2013 The company shall place the matter relating to such appointment for ratification by members at every annual general meeting. ... Under the Act, the provisions for rotation of auditors in the listed Company & certain other class of Companies, have been provided for. #chapterxofcompaniesact2013

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements The new parent corporate law “The Companies Act 2013” is mostly ... I am limiting my write-up to the provisions to the Act, and I request the readers to refer relevant rules, if any, before ... in the 2013 Act is the Section 447 dealing with “Punishment for fraud”. ... Section 448

What is Corporate Image

What is Corporate Image A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public. The corporate identity is typically visualized by branding and with the use of trademarks, but it can also include things like product design, advertising, public relations etc #WhatisCorporateImage

What is Energy Audit

What is Energy Audit An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. #whatisenergyaudit