Trial Balance and Rectification of Errors - Class 11 Accountancy - Chapter 6 - Notes, NCERT Solutions & Extra Questions
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Extra Questions - Trial Balance and Rectification of Errors | Financial Accounting 1 | Accountancy | Class 11
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State the meaning of a trial balance?
A trial balance is a statement that lists the balances of all accounts in the ledger to verify the arithmetical accuracy of accounting records. It ensures that the total of all debit balances equals the total of all credit balances, confirming accurate posting. Typically prepared at the end of an accounting period, it serves as a basis for preparing financial statements, helping identify errors by showing the final position of accounts without needing to review the entire ledger.
Give two examples of errors of principle?
Errors of principle occur when accounting principles are violated or ignored, leading to incorrect classification between capital and revenue items.
Two examples include:
1. Treating Capital Expenditure as Revenue Expenditure: Recording the cost of acquiring a new machinery (which is a capital expenditure) as maintenance expense in the profit and loss account.
2. Recording a Revenue Receipt as Capital Receipt: Crediting proceeds from routine sales (a revenue receipt) to the capital account instead of the sales account.
These errors affect the financial statements but do not impact the trial balance.
Give two examples of errors of commission?
Two examples of errors of commission are:
1. Wrong Posting of Transaction: A transaction of ₹25,000 paid to Preetpal Traders is correctly recorded in the cash book but is posted as ₹2,500 in Preetpal's ledger account. This misposting affects the accuracy of Preetpal's account balance.
2. Wrong Totalling or Balancing: A ledger account's balance is incorrectly calculated, such as when the total of the debit side is overcast by ₹1,000, leading to an inaccurate account balance.
What are the methods of preparing trial balance?
Theoretically speaking, a trial balance can be prepared using the following three methods:
1. Totals Method: Under this method, the total of each side of the ledger (debit and credit) is ascertained and shown in the trial balance in the respective columns.
2. Balances Method: This method lists the balances of all ledger accounts and is widely used in practice due to its efficiency in summarizing the net effect of all transactions.
3. Totals-cum-balances Method: This combines both the totals and balance methods but is rarely used due to its complexity.
What are the steps taken by an accountant to locate the errors in the trial balance?
To locate the errors in a trial balance, an accountant can follow these steps:
- Recast the totals of the debit and credit columns.
- Compare the account titles and amounts in the trial balance with those in the ledger.
- Compare the current year's trial balance with the previous year's to check for discrepancies.
- Re-check the balances of individual ledger accounts.
- Verify the posting correctness from the books of original entry.
- Check for errors divisible by 2 or 9, suggesting transposition or posting errors.
What is a suspense account? Is it necessary that is suspense account will balance off after rectification of the errors detected by the accountant? If not, then what happens to the balance still remaining in suspense account?
A suspense account is a temporary account used to record the discrepancy in the trial balance until errors are located and rectified. It helps facilitate the preparation of financial statements even when the trial balance doesn't tally. It is not necessary that the suspense account will balance off immediately after rectifying the detected errors. If the balance still remains in the suspense account, it implies that not all errors have been detected, thus the balance is carried forward to the next accounting period.
What kinds of errors would cause difference in the trial balance. Also list examples that would not be revealed by a trial balance?
Errors causing difference in the trial balance generally affect only one side of the ledger. These are: errors in totalling subsidiary books, posting errors (wrong amount, side, or account), balance calculation errors, and omitting account balances.
Examples not revealed by a trial balance include errors of principle (e.g., wrongly classifying capital expenditure as revenue expense), complete omission of entry recording, compensating errors, and equal debit and credit of wrong amounts. These errors even out and tally, making detection through trial balance impossible.
State the limitations of trial balance?
A trial balance has several limitations:
1. Error Detection: It does not detect all errors, such as errors of omission, compensating errors, or errors of principle.
2. Guarantee of Accuracy: Agreement of the trial balance does not guarantee that accounts are free from all errors, as it only ensures arithmetical accuracy.
3. Fraud: It cannot identify cases of deliberate fraud or manipulation.
4. Detail: It does not provide detailed information about the nature of transactions or the reasons behind the balances.
Describe the purpose for the preparation of trial balance.
The primary purpose of preparing a trial balance is to ensure the arithmetical accuracy of ledger accounts by verifying that the total debits equal the total credits. It helps in locating errors that might have occurred during the recording process. Additionally, the trial balance serves as a summary statement that facilitates the preparation of financial statements such as the Profit & Loss account and Balance Sheet. By consolidating all account balances in one place, it simplifies the accountant's task of preparing final accounts without having to sift through the entire ledger. While a tallied trial balance does indicate accurate posting, it is not a conclusive proof of correctness as some errors may not affect its agreement.
Explain errors of principle and give two examples with measures to rectify them.
Errors of principle occur when transactions are recorded in violation of generally accepted accounting principles, often resulting in incorrect classification between capital and revenue expenditures or receipts. These errors do not impact the trial balance agreement as both debit and credit amounts are equal.
Example 1: Amount spent on additions to buildings (capital expenditure) debited to the Maintenance and Repairs account (revenue expense).
Rectification measure:
Buildings A/c Dr.
To Maintenance and Repairs A/c
Example 2: Revenue from the sale of old equipment recorded in the Sales account instead of being credited to the Equipment Disposal account.
Rectification measure:
Sales A/c Dr.
To Equipment Disposal A/c
These rectification entries correct the classification errors, ensuring accurate financial reporting.
Explain the errors of commission and give two examples with measures to rectify them.
Errors of commission occur due to incorrect recording or posting of transactions, resulting in wrong amounts being entered or posted to incorrect accounts. These errors are clerical and typically affect the trial balance.
Examples:
1. Wrong Posting Amount:
- Example: Paying ₹25,000 to a supplier but posting only ₹2,500.
- Rectification: Debit the supplier’s account by ₹22,500 to correct the short debit.
2. Posting to Wrong Account:
- Example: Recording credit sales of ₹10,000 to Mohan as ₹1,000.
- Rectification: Debit Mohan’s account with the remaining ₹9,000.
Measures to rectify:
1. Identify the error, reverse the incorrect entry.
2. Post the correct entry to the respective account.
What are the different types of errors that are usually committed in recording business transaction.
In accounting, errors are often categorized into the following types:
1. Errors of Commission: These are mistakes made due to incorrect recording, posting, totalling, or balancing. For example, entering ₹2,500 instead of ₹25,000.
2. Errors of Omission: These occur when a transaction is either not recorded at all (complete omission) or partially recorded (partial omission).
3. Errors of Principle: These result from violating accounting principles, like misclassifying a capital expenditure as a revenue expenditure.
4. Compensating Errors: These are multiple errors that counterbalance each other, thus not affecting the trial balance totals, e.g., overcasting sales by ₹1,000 and undercasting purchases by ₹1,000.
Such errors affect the accuracy of financial records and necessitate careful rectification to ensure reliable financial statements.
As an accountant of a company, you are disappointed to learn that the totals in your new trial balance are not equal. After going through a careful analysis, you have discovered only one error. Specifically, the balance of the Office Equipment account has a debit balance of ₹ 15,600 on the trial balance. However, you have figured out that a correctly recorded credit purchase of pendrive for ₹ 3,500 was posted from the journal to the ledger with a ₹ 3,500 debit to Office Equipment and another ₹ 3,500 debit to creditors accounts. Answer each of the following questions and present the amount of any misstatement :
(a) Is the balance of the office equipment account overstated, understated, or correctly stated in the trial balance?
(b) Is the balance of the creditors account overstated, understated, or correctly stated in the trial balance?
(c) Is the debit column total of the trial balance overstated, understated, or correclty stated?
(d) Is the credit column total of the trial balance overstated, understated, or correctly stated?
(e) If the debit column total of the trial balance is ₹$2,40,000$ before correcting the error, what is the total of credit column.
(a) The balance of the office equipment account is overstated. The correct entry should have been a debit to the relevant expense account, not to Office Equipment, thus Office Equipment's debit balance is incorrectly increased by ₹ 3,500.
(b) The balance of the creditors account is understated. The correct posting from the journal should have been a credit to creditors. Therefore, a ₹ 3,500 debit incorrects reduces the liability instead.
(c) The debit column total of the trial balance is overstated. The incorrect double debit entry results in an extra amount of ₹ 7,000 (₹ 3,500 twice) on the debit side.
(d) The credit column total of the trial balance is understated. The creditors account should have been credited by ₹ 3,500, thus the credit side is short by this amount.
(e) If the debit column total of the trial balance is ₹ 2,40,000 before correcting the error, the total of the credit column would be ₹ 2,36,500. This is because the error caused an understatement of ₹ 3,500 on the credit side.
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Rectify the following errors:
(i) Credit sales to Mohan ₹ 7,000 were not recorded.
(ii) Credit purchases from Rohan ₹ 9,000 were not recorded.
(iii) Goods returned to Rakesh ₹ 4,000 were not recorded.
(iv) Goods returned from Mahesh ₹ 1,000 were not recorded.
Let's rectify the errors mentioned:
(i) Credit sales to Mohan ₹ 7,000 were not recorded.
This is an error of omission. Its effect is that Mohan's account has not been debited, and the Sales account has not been credited. The rectification entry will be:
$$ \begin{array}{rl} \text{Mohan's A/c} & \text{Dr.} \quad ₹ 7,000 \ \text{To Sales A/c} & ₹ 7,000 \ \end{array} $$
(ii) Credit purchases from Rohan ₹ 9,000 were not recorded.
This is an error of omission. Its effect is that Purchases account has not been debited, and Rohan's account has not been credited. The rectification entry will be:
$$ \begin{array}{rl} \text{Purchases A/c} & \text{Dr.} \quad ₹ 9,000 \ \text{To Rohan's A/c} & ₹ 9,000 \ \end{array} $$
(iii) Goods returned to Rakesh ₹ 4,000 were not recorded.
This is an error of omission. Its effect is that Return Outwards account (or Purchase returns) has not been credited, and Rakesh's account has not been debited. The rectification entry will be:
$$ \begin{array}{rl} \text{Rakesh's A/c} & \text{Dr.} \quad ₹ 4,000 \ \text{To Return Outwards A/c} & ₹ 4,000 \ \end{array} $$
(iv) Goods returned from Mahesh ₹ 1,000 were not recorded.
This is an error of omission. Its effect is that Sales Return account has not been debited, and Mahesh's account has not been credited. The rectification entry will be:
$$ \begin{array}{rl} \text{Sales Return A/c} & \text{Dr.} \quad ₹ 1,000 \ \text{To Mahesh's A/c} & ₹ 1,000 \ \end{array} $$
These rectification entries correct the errors by ensuring that the affected accounts are updated correctly in the accounting records.
Rectify the following errors:
(i) Credit sales to Mohan ₹ 7,000 were recorded as ₹ 700 .
(ii) Credit purchases from Rohan ₹ 9,000 were recorded as ₹ 900 .
(iii) Goods returned to Rakesh ₹ 4,000 were recorded as ₹ 400 .
(iv) Goods returned from Mahesh ₹ 1,000 were recorded as ₹ 100 .
To rectify the errors, we need to identify the correct amounts and determine the necessary adjustments through journal entries:
(i) Credit Sales to Mohan ₹ 7,000 were recorded as ₹ 700.
Incorrect Entry: $$ \text{Mohan's A/c Dr.} \quad ₹ 700 \ \text{To Sales A/c} \quad ₹ 700 $$
Correct Entry: $$ \text{Mohan's A/c Dr.} \quad ₹ 7,000 \ \text{To Sales A/c} \quad ₹ 7,000 $$
Rectification Entry: $$ \text{Mohan's A/c Dr.} \quad ₹ 6,300 \ \text{To Sales A/c} \quad ₹ 6,300 $$
(ii) Credit Purchases from Rohan ₹ 9,000 were recorded as ₹ 900.
Incorrect Entry: $$ \text{Purchases A/c Dr.} \quad ₹ 900 \ \text{To Rohan's A/c} \quad ₹ 900 $$
Correct Entry: $$ \text{Purchases A/c Dr.} \quad ₹ 9,000 \ \text{To Rohan's A/c} \quad ₹ 9,000 $$
Rectification Entry: $$ \text{Purchases A/c Dr.} \quad ₹ 8,100 \ \text{To Rohan's A/c} \quad ₹ 8,100 $$
(iii) Goods returned to Rakesh ₹ 4,000 were recorded as ₹ 400.
Incorrect Entry: $$ \text{Return Outwards A/c Dr.} \quad ₹ 400 \ \text{To Rakesh's A/c} \quad ₹ 400 $$
Correct Entry: $$ \text{Return Outwards A/c Dr.} \quad ₹ 4,000 \ \text{To Rakesh's A/c} \quad ₹ 4,000 $$
Rectification Entry: $$ \text{Return Outwards A/c Dr.} \quad ₹ 3,600 \ \text{To Rakesh's A/c} \quad ₹ 3,600 $$
(iv) Goods returned from Mahesh ₹ 1,000 were recorded as ₹ 100.
Incorrect Entry: $$ \text{Mahesh's A/c Dr.} \quad ₹ 100 \ \text{To Sales Return A/c} \quad ₹ 100 $$
Correct Entry: $$ \text{Mahesh's A/c Dr.} \quad ₹ 1,000 \ \text{To Sales Return A/c} \quad ₹ 1,000 $$
Rectification Entry: $$ \text{Mahesh's A/c Dr.} \quad ₹ 900 \ \text{To Sales Return A/c} \quad ₹ 900 $$
Summary of Rectification Entries:
- Credit Sales to Mohan rectification entry:
$$ \begin{aligned} \text{Mohan's A/c} & \quad \text{Dr.} \quad ₹ 6,300 \ \text{To Sales A/c} & \quad ₹ 6,300 \ \end{aligned} $$
- Credit Purchases from Rohan rectification entry:
$$ \begin{aligned} \text{Purchases A/c} & \quad \text{Dr.} \quad ₹ 8,100 \ \text{To Rohan's A/c} & \quad ₹ 8,100 \ \end{aligned} $$
- Goods Returned to Rakesh rectification entry:
$$ \begin{aligned} \text{Return Outwards A/c} & \quad \text{Dr.} \quad ₹ 3,600 \ \text{To Rakesh's A/c} & \quad ₹ 3,600 \ \end{aligned} $$
- Goods Returned from Mahesh rectification entry:
$$ \begin{aligned} \text{Mahesh's A/c} & \quad \text{Dr.} \quad ₹ 900 \ \text{To Sales Return A/c} & \quad ₹ 900 \ \end{aligned} $$
Rectify the following errors:
(i) Credit sales to Mohan ₹ 7,000 were recorded as ₹ 7,200 .
(ii) Credit purchases from Rohan ₹ 9,000 were recorded as ₹ 9,900 .
(iii) Goods returned to Rakesh ₹ 4,000 were recorded as ₹ 4,040 .
(iv) Goods returned from Mahesh ₹ 1,000 were recorded as ₹ 1,600 .
To rectify the errors mentioned, we will create the necessary journal entries to correct each mistake.
(i) Credit sales to Mohan ₹ 7,000 were recorded as ₹ 7,200
The effect of recording credit sales to Mohan as ₹ 7,200 instead of ₹ 7,000 means that Mohan's account has a debit of ₹ 200 more, and Sales account has a credit of ₹ 200 more. We need to reverse this effect:
Journal Entry:
| Account | Dr. / Cr. | Amount ₹ |
| ------------ | ---------- | -------- |
| Sales A/c | Dr. | 200 |
| To Mohan's A/c | Cr. | 200 |
(ii) Credit purchases from Rohan ₹ 9,000 were recorded as ₹ 9,900
Recording credit purchases from Rohan as ₹ 9,900 instead of ₹ 9,000 means that Rohan's account has a credit of ₹ 900 more, and Purchases account has a debit of ₹ 900 more. We need to reverse this effect:
Journal Entry:
| Account | Dr. / Cr. | Amount ₹ |
| ------------ | ---------- | -------- |
| Rohan's A/c | Dr. | 900 |
| To Purchases A/c | Cr. | 900 |
(iii) Goods returned to Rakesh ₹ 4,000 were recorded as ₹ 4,040
Recording goods returned to Rakesh as ₹ 4,040 instead of ₹ 4,000 means that Rakesh's account has a credit of ₹ 40 more, and Return Outwards account has a debit of ₹ 40 more. We need to reverse this effect:
Journal Entry:
| Account | Dr. / Cr. | Amount ₹ |
| -------------- | ---------- | -------- |
| Rakesh's A/c | Dr. | 40 |
| To Return Outwards A/c | Cr. | 40 |
(iv) Goods returned from Mahesh ₹ 1,000 were recorded as ₹ 1,600
Recording goods returned from Mahesh as ₹ 1,600 instead of ₹ 1,000 means that Mahesh's account has a debit of ₹ 600 more, and Return Inwards account has a credit of ₹ 600 more. We need to reverse this effect:
Journal Entry:
| Account | Dr. / Cr. | Amount ₹ |
| ----------------- | ---------- | -------- |
| Return Inwards A/c | Dr. | 600 |
| To Mahesh's A/c | Cr. | 600 |
These entries will correct the mistakes by adjusting the affected accounts with the correct amounts.
Rectify the following errors:
(a) Salary paid ₹ 5,000 was debited to employee's personal account.
(b) Rent Paid ₹ 4,000 was posted to landlord's personal account.
(c) Goods withdrawn by proprietor for personal use ₹ 1,000 were debited to sundry expenses account.
(d) Cash received from Kohli ₹ 2,000 was posted to Kapur’s account.
(e) Cash paid to Babu ₹ 1,500 was posted to Sabu's account.
To rectify the errors mentioned, we will pass adjusting journal entries as follows:
(a) Salary paid ₹ 5,000 was debited to employee's personal account:
Incorrect Entry:
Employee's Personal A/c Dr. ₹ 5,000
To Cash A/c ₹ 5,000
Correct Entry:
Salary A/c Dr. ₹ 5,000
To Cash A/c ₹ 5,000
Rectification Entry:
Salary A/c Dr. ₹ 5,000
To Employee's Personal A/c ₹ 5,000
(b) Rent Paid ₹ 4,000 was posted to landlord's personal account:
Incorrect Entry:
Landlord's Personal A/c Dr. ₹ 4,000
To Cash A/c ₹ 4,000
Correct Entry:
Rent A/c Dr. ₹ 4,000
To Cash A/c ₹ 4,000
Rectification Entry:
Rent A/c Dr. ₹ 4,000
To Landlord's Personal A/c ₹ 4,000
(c) Goods withdrawn by proprietor for personal use ₹ 1,000 were debited to sundry expenses account:
Incorrect Entry:
Sundry Expenses A/c Dr. ₹ 1,000
To Purchases A/c ₹ 1,000
Correct Entry:
Drawings A/c Dr. ₹ 1,000
To Purchases A/c ₹ 1,000
Rectification Entry:
Drawings A/c Dr. ₹ 1,000
To Sundry Expenses A/c ₹ 1,000
(d) Cash received from Kohli ₹ 2,000 was posted to Kapur’s account:
Incorrect Entry:
Cash A/c Dr. ₹ 2,000
To Kapur's A/c ₹ 2,000
Correct Entry:
Cash A/c Dr. ₹ 2,000
To Kohli's A/c ₹ 2,000
Rectification Entry:
Kohli's A/c Dr. ₹ 2,000
To Kapur's A/c ₹ 2,000
(e) Cash paid to Babu ₹ 1,500 was posted to Sabu's account:
Incorrect Entry:
Sabu's A/c Dr. ₹ 1,500
To Cash A/c ₹ 1,500
Correct Entry:
Babu's A/c Dr. ₹ 1,500
To Cash A/c ₹ 1,500
Rectification Entry:
Babu's A/c Dr. ₹ 1,500
To Sabu's A/c ₹ 1,500
Summary of Rectification Entries
1. Salary A/c Dr. ₹ 5,000
To Employee's Personal A/c ₹ 5,000
2. Rent A/c Dr. ₹ 4,000
To Landlord's Personal A/c ₹ 4,000
3. Drawings A/c Dr. ₹ 1,000
To Sundry Expenses A/c ₹ 1,000
4. Kohli's A/c Dr. ₹ 2,000
To Kapur's A/c ₹ 2,000
5. Babu's A/c Dr. ₹ 1,500
To Sabu's A/c ₹ 1,500
Important Notes
- Salary Payment and Rent Paid should ideally be recorded correctly to their respective expense accounts rather than personal accounts of employees or landlord.
- Goods withdrawn by proprietor should be recorded as "Drawings" rather than sundry expenses; this categorizes it correctly as owner's withdrawals.
- Correct identification and rectification of error ensures proper financial data, aiding in transparency and informed decision-making.
Rectify the following errors:
(a) Credit Sales to Mohan ₹ 7,000 were recorded in purchases book.
(b) Credit Purchases from Rohan ₹ 9,00 were recorded in sales book.
(c) Goods returned to Rakesh ₹ 4,000 were recorded in the sales return book.
(d) Goods returned from Mahesh ₹ 1,000 were recorded in purchases return book.
(e) Goods returned from Nahesh ₹ 2,000 were recorded in purchases book.
Rectifying errors involves making the necessary adjustments in the journal to correct the issues. Here are the rectification entries for each error:
(a) Credit Sales to Mohan ₹ 7,000 were recorded in purchases book.
This is an error of principle.
-
Wrong Entry:
Purchases A/c Dr. ₹ 7,000
-
Correct Entry:
Mohan's A/c Dr. ₹ 7,000 To Sales A/c ₹ 7,000
-
Rectification Entry:
Sales A/c Dr. ₹ 7,000 To Purchases A/c ₹ 7,000 Mohan's A/c Dr. ₹ 7,000
(b) Credit Purchases from Rohan ₹ 900 were recorded in sales book.
This is an error of principle.
-
Wrong Entry:
Sundry Debtors A/c Dr. ₹ 900 To Sales A/c ₹ 900
-
Correct Entry:
Purchases A/c Dr. ₹ 900 To Rohan's A/c ₹ 900
-
Rectification Entry:
Sales A/c Dr. ₹ 900 To Sundry Debtors A/c ₹ 900 Purchases A/c Dr. ₹ 900 To Rohan's A/c ₹ 900
(c) Goods returned to Rakesh ₹ 4,000 were recorded in the sales return book.
This is an error of principle.
-
Wrong Entry:
Sales Return A/c Dr. ₹ 4,000 To Rakesh's A/c ₹ 4,000
-
Correct Entry:
Rakesh's A/c Dr. ₹ 4,000 To Purchase Return A/c ₹ 4,000
-
Rectification Entry:
Rakesh's A/c Dr. ₹ 4,000 To Sales Return A/c ₹ 4,000 Purchase Return A/c Dr. ₹ 4,000 To Rakesh's A/c ₹ 4,000
(d) Goods returned from Mahesh ₹ 1,000 were recorded in purchases return book.
This is an error of principle.
-
Wrong Entry:
Purchases Return A/c Dr. ₹ 1,000 To Mahesh's A/c. ₹ 1,000
-
Correct Entry:
Sales Return A/c Dr. ₹ 1,000 To Mahesh's A/c ₹ 1,000
-
Rectification Entry:
Purchases Return A/c Dr. ₹ 1,000 To Sales Return A/c ₹ 1,000
(e) Goods returned from Nahesh ₹ 2,000 were recorded in purchases book.
This is an error of principle.
-
Wrong Entry:
Purchases A/c Dr. ₹ 2,000
-
Correct Entry:
Sales Return A/c Dr. ₹ 2,000 To Nahesh's A/c ₹ 2,000
-
Rectification Entry:
Purchases A/c Dr. ₹ 2,000 To Sales Return A/c ₹ 2,000
Summary of Rectification Entries:
1. Sales A/c Dr. ₹ 7,000
Purchases A/c Dr. ₹ 7,000
Mohan's A/c Dr. ₹ 7,000
2. Sales A/c Dr. ₹ 900
Sundry Debtors A/c Dr. ₹ 900
Purchases A/c Dr. ₹ 900
Rohan's A/c Dr. ₹ 900
3. Rakesh's A/c Dr. ₹ 8,000
Sales Return A/c Dr. ₹ 4,000
Purchase Return A/c Dr. ₹ 4,000
4. Purchases Return A/c Dr. ₹ 1,000
Sales Return A/c Dr. ₹ 1,000
5. Purchases A/c Dr. ₹ 2,000
Sales Return A/c Dr. ₹ 2,000
Nahesh’s A/c Dr. ₹ 2,000
These entries will rectify the initial incorrect entries made for each of the transactions.
Rectify the following errors:
(a) Sales book overcast by ₹ 700 .
(b) Purchases book overcast by ₹ 500 .
(c) Sales return book overcast by ₹ 300 .
(d) Purchase return book overcast by ₹ 200 .
To rectify the errors involving the overcast books, you need to pass adjusting entries to correct the account balances. Here are the rectifying entries for each error:
(a) Sales Book Overcast by ₹ 700
The sales account has been overstated, so you need to decrease it by ₹ 700.
Journal Entry:
Account | Debit (₹) | Credit (₹) |
---|---|---|
Sales A/c | 700 | |
Suspense A/c | 700 |
(b) Purchases Book Overcast by ₹ 500
The purchases account has been overstated, so you need to decrease it by ₹ 500.
Journal Entry:
Account | Debit (₹) | Credit (₹) |
---|---|---|
Suspense A/c | 500 | |
Purchases A/c | 500 |
(c) Sales Return Book Overcast by ₹ 300
The sales return account has been overstated, so you need to decrease it by ₹ 300.
Journal Entry:
Account | Debit (₹) | Credit (₹) |
---|---|---|
Suspense A/c | 300 | |
Sales Return A/c | 300 |
(d) Purchase Return Book Overcast by ₹ 200
The purchase return account has been overstated, so you need to decrease it by ₹ 200.
Journal Entry:
Account | Debit (₹) | Credit (₹) |
---|---|---|
Purchase Return A/c | 200 | |
Suspense A/c | 200 |
Note: The use of the Suspense Account is to temporarily balance the books until all the errors are rectified and the trial balance is corrected.
Rectify the following errors:
(a) Sales book undercast by ₹300.
(b) Purchases book undercast by ₹ 400 .
(c) Return Inwards book undercast by ₹ 200 .
(d) Return outwards book undercast by ₹ 100 .
To rectify the given errors, you need to understand that they are undercast errors, meaning the totals recorded were less than the actual amounts. We will correct these by debiting or crediting the concerned accounts.
Rectification Entries:
-
Sales book undercast by ₹300:
-
Entry:
Sales Account \( Dr. \) ₹300 To Suspense Account ₹300
-
Entry:
-
Purchases book undercast by ₹400:
-
Entry:
Purchases Account \( Dr. \) ₹400 To Suspense Account ₹400
-
Entry:
-
Return Inwards book undercast by ₹200:
-
Entry:
Return Inwards Account \( Dr. \) ₹200 To Suspense Account ₹200
-
Entry:
-
Return Outwards book undercast by ₹100:
-
Entry:
Suspense Account \( Dr. \) ₹100 To Return Outwards Account ₹100
-
Entry:
Rectify the following errors and ascertain the amount of difference in trial balance by preparing suspense account:
(a) Credit sales to Mohan ₹ 7,000 were not posted.
(b) Credit purchases from Rohan ₹ 9,000 were not posted.
(c) Goods returned to Rakesh ₹ 4,000 were not posted.
(d) Goods returned from Mahesh ₹ 1,000 were not posted.
(e) Cash paid to Ganesh ₹ 3,000 was not posted.
(f) Cash sales ₹ 2,000 were not posted.
Let's rectify the errors and prepare the necessary journal entries.
Error Rectification Entries
(a) Credit sales to Mohan ₹ 7,000 were not posted:
Rectification Entry:
Mohan's A/c Dr. ₹ 7,000
To Suspense A/c ₹ 7,000
(b) Credit purchases from Rohan ₹ 9,000 were not posted:
Rectification Entry:
Suspense A/c Dr. ₹ 9,000
To Rohan's A/c ₹ 9,000
(c) Goods returned to Rakesh ₹ 4,000 were not posted:
Rectification Entry:
Suspense A/c Dr. ₹ 4,000
To Rakesh's A/c ₹ 4,000
(d) Goods returned from Mahesh ₹ 1,000 were not posted:
Rectification Entry:
Mahesh's A/c Dr. ₹ 1,000
To Suspense A/c ₹ 1,000
(e) Cash paid to Ganesh ₹ 3,000 was not posted:
Rectification Entry:
Suspense A/c Dr. ₹ 3,000
To Ganesh's A/c ₹ 3,000
(f) Cash sales ₹ 2,000 were not posted:
Rectification Entry:
Cash A/c Dr. ₹ 2,000
To Suspense A/c ₹ 2,000
Suspense Account
Now, let's prepare the Suspense Account to ascertain the amount of difference in the trial balance:
Suspense Account
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) | |---|---|---|---|---| | To Mohan's A/c | 7,000 | | By Rohan's A/c | 9,000 | | To Mahesh's A/c | 1,000 | | By Rakesh's A/c | 4,000 | | To Cash A/c | 2,000 | | By Ganesh's A/c | 3,000 | | | | | By Cash A/c | 2,000 | | | | | Total | 18,000 | | Total | 10,000 | | |
From the Suspense Account, we can see that the total difference in the trial balance is ₹ 18,000.
Rectify the following errors and ascertain the amount of difference in trial balance by preparing suspense account:
(a) Credit sales to Mohan ₹ 7,000 were posted as ₹ 9,000 .
(b) Credit purchases from Rohan ₹ 9,000 were posted as ₹ 6,000 .
(c) Goods returned to Rakesh ₹ 4,000 were posted as ₹ 5,000 .
(d) Goods returned from Mahesh ₹ 1,000 were posted as ₹ 3,000 .
(e) Cash sales ₹ 2,000 were posted as ₹ 200 .
To rectify the given errors and ascertain the amount of difference in the trial balance by preparing a suspense account, we need to pass the following journal entries:
Rectification Entries:
-
Credit sales to Mohan ₹ 7,000 were posted as ₹ 9,000:
-
Wrong effect:
- Mohan's A/c Dr. ₹ 9,000
- To Sales A/c ₹ 9,000
-
Correct effect:
- Mohan's A/c Dr. ₹ 7,000
- To Sales A/c ₹ 7,000
-
Rectification entry:
- Sales A/c Dr. ₹ 2,000
- To Mohan's A/c ₹ 2,000
-
Wrong effect:
-
Credit purchases from Rohan ₹ 9,000 were posted as ₹ 6,000:
-
Wrong effect:
- Purchases A/c Dr. ₹ 6,000
- To Rohan's A/c ₹ 6,000
-
Correct effect:
- Purchases A/c Dr. ₹ 9,000
- To Rohan's A/c ₹ 9,000
-
Rectification entry:
- Purchases A/c Dr. ₹ 3,000
- To Suspense A/c ₹ 3,000
-
Wrong effect:
-
Goods returned to Rakesh ₹ 4,000 were posted as ₹ 5,000:
-
Wrong effect:
- Rakesh's A/c Dr. ₹ 5,000
- To Return Outwards A/c ₹ 5,000
-
Correct effect:
- Rakesh's A/c Dr. ₹ 4,000
- To Return Outwards A/c ₹ 4,000
-
Rectification entry:
- Suspense A/c Dr. ₹ 1,000
- To Rakesh's A/c ₹ 1,000
-
Wrong effect:
-
Goods returned from Mahesh ₹ 1,000 were posted as ₹ 3,000:
-
Wrong effect:
- Return Inwards A/c Dr. ₹ 3,000
- To Mahesh's A/c ₹ 3,000
-
Correct effect:
- Return Inwards A/c Dr. ₹ 1,000
- To Mahesh's A/c ₹ 1,000
-
Rectification entry:
- Mahesh's A/c Dr. ₹ 2,000
- To Suspense A/c ₹ 2,000
-
Wrong effect:
-
Cash sales ₹ 2,000 were posted as ₹ 200:
-
Wrong effect:
- Cash A/c Dr. ₹ 200
- To Sales A/c ₹ 200
-
Correct effect:
- Cash A/c Dr. ₹ 2,000
- To Sales A/c ₹ 2,000
-
Rectification entry:
- Cash A/c Dr. ₹ 1,800
- To Suspense A/c ₹ 1,800
-
Wrong effect:
Suspense Account:
Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) |
---|---|---|---|---|---|---|---|
Difference as per Trial Balance | Sales | 2,000 | |||||
From Mahesh | 2,000 | ||||||
Suspense A/c | 3,000 | Purchases | 3,000 | ||||
Goods returned to Rakesh | 1,000 | ||||||
Cash sales | 1,800 | ||||||
Suspense A/c | 9,800 | ||||||
Balance c/d | 9,800 |
Thus, after rectifying the errors, the balance of the Suspense Account would be ₹ 9,800.
Rectify the following errors:
(a) Credit sales to Mohan ₹ 7,000 were posted to Karan.
(b) Credit purchases from Rohan ₹ 9,000 were posted to Gobind.
(c) Goods returned to Rakesh ₹ 4,000 were posted to Naresh.
(d) Goods returned from Mahesh ₹ 1,000 were posted to Manish.
(e) Cash sales ₹ 2,000 were posted to commission account.
To rectify these errors, let's first identify the incorrect entries and then provide the correct rectification entries:
(a) Credit sales to Mohan ₹ 7,000 were posted to Karan.
Wrong Entry: [ \text{Karan's A/c Dr. ₹ 7,000} ] [ \text{To Sales A/c ₹ 7,000} ]
Correct Entry: [ \text{Mohan's A/c Dr. ₹ 7,000} ] [ \text{To Sales A/c ₹ 7,000} ]
Rectification Entry: [ \text{Mohan's A/c Dr. ₹ 7,000} ] [ \text{To Karan's A/c ₹ 7,000} ]
(b) Credit purchases from Rohan ₹ 9,000 were posted to Gobind.
Wrong Entry: [ \text{Purchases A/c Dr. ₹ 9,000} ] [ \text{To Gobind's A/c ₹ 9,000} ]
Correct Entry: [ \text{Purchases A/c Dr. ₹ 9,000} ] [ \text{To Rohan's A/c ₹ 9,000} ]
Rectification Entry: [ \text{Rohan's A/c Dr. ₹ 9,000} ] [ \text{To Gobind's A/c ₹ 9,000} ]
(c) Goods returned to Rakesh ₹ 4,000 were posted to Naresh.
Wrong Entry: [ \text{Return Outwards A/c Dr. ₹ 4,000} ] [ \text{To Naresh's A/c ₹ 4,000} ]
Correct Entry: [ \text{Return Outwards A/c Dr. ₹ 4,000} ] [ \text{To Rakesh's A/c ₹ 4,000} ]
Rectification Entry: [ \text{Naresh's A/c Dr. ₹ 4,000} ] [ \text{To Rakesh's A/c ₹ 4,000} ]
(d) Goods returned from Mahesh ₹ 1,000 were posted to Manish.
Wrong Entry: [ \text{Sales Return A/c Dr. ₹ 1,000} ] [ \text{To Manish's A/c ₹ 1,000} ]
Correct Entry: [ \text{Sales Return A/c Dr. ₹ 1,000} ] [ \text{To Mahesh's A/c ₹ 1,000} ]
Rectification Entry: [ \text{Manish's A/c Dr. ₹ 1,000} ] [ \text{To Mahesh's A/c ₹ 1,000} ]
(e) Cash sales ₹ 2,000 were posted to commission account.
Wrong Entry: [ \text{Commission A/c Dr. ₹ 2,000} ] [ \text{To Cash A/c ₹ 2,000} ]
Correct Entry: [ \text{Cash A/c Dr. ₹ 2,000} ] [ \text{To Sales A/c ₹ 2,000} ]
Rectification Entry: [ \text{Cash A/c Dr. ₹ 2,000} ] [ \text{To Commission A/c ₹ 2,000} ] [ \text{Commission A/c Dr. ₹ 2,000} ] [ \text{To Sales A/c ₹ 2,000} ]
In summary, the rectification entries are:
-
Mohan's A/c Dr. ₹ 7,000 To Karan's A/c ₹ 7,000
-
Rohan's A/c Dr. ₹ 9,000 To Gobind's A/c ₹ 9,000
-
Naresh's A/c Dr. ₹ 4,000 To Rakesh's A/c ₹ 4,000
-
Manish's A/c Dr. ₹ 1,000 To Mahesh's A/c ₹ 1,000
-
Cash A/c Dr. ₹ 2,000 To Commission A/c ₹ 2,000 Commission A/c Dr. ₹ 2,000 To Sales A/c ₹ 2,000
Rectify the following errors assuming that a suspense account was opened. Ascertain the difference in trial balance.
(a) Credit sales to Mohan ₹ 7,000 were posted to the credit of his account.
(b) Credit purchases from Rohan ₹ 9,000 were posted to the debit of his account as ₹ 6,000 .
(c) Goods returned to Rakesh ₹ 4,000 were posted to the credit of his account.
(d) Goods returned from Mahesh ₹ 1,000 were posted to the debit of his account as $₹ 2,000$.
(e) Cash sales ₹ 2,000 were posted to the debit of sales account as ₹ 5,000 .
Rectification of Errors
To rectify the errors, we need to pass necessary journal entries and consider the suspense account where applicable.
(a) Credit sales to Mohan ₹ 7,000 were posted to the credit of his account
The error has no impact on the balance of debits and credits.
- Correct Entry: [ \text{Mohan's A/c Dr. ₹7,000} \rightarrow \text{To Sales A/c ₹7,000} ]
- Wrong Effect: [ \text{Sales A/c Dr. ₹7,000} ]
(b) Credit purchases from Rohan ₹ 9,000 were posted to the debit of his account as ₹ 6,000
- Correct Entry: [ \text{Purchases A/c ₹9,000} \rightarrow \text{To Rohan's A/c ₹9,000} ]
-
Wrong Effect:
[
\text{Purchases A/c ₹9,000} \rightarrow \text{To Rohan's A/c ₹6,000}
]
- Difference: [ \text{₹9,000 - ₹6,000 = ₹3,000} ]
- Rectification Entry: [ \text{Suspense A/c Dr. ₹3,000} \rightarrow \text{To Rohan's A/c ₹3,000} ]
(c) Goods returned to Rakesh ₹ 4,000 were posted to the credit of his account
The error has no impact on the balance of debits and credits.
- Correct Entry: [ \text{Rakesh's A/c Dr. ₹4,000} \rightarrow \text{To Purchase Return A/c ₹4,000} ]
- Wrong Effect: [ \text{Purchase Return A/c Dr. ₹4,000} ]
(d) Goods returned from Mahesh ₹ 1,000 were posted to the debit of his account as ₹ 2,000
- Correct Entry: [ \text{Sales Return A/c ₹1,000} \rightarrow \text{To Mahesh's A/c ₹1,000} ]
-
Wrong Effect:
[
\text{Sales Return A/c ₹2,000} \rightarrow \text{To Mahesh's A/c ₹2,000}
]
- Difference: [ \text{₹2,000 - ₹1,000 = ₹1,000} ]
- Rectification Entry: [ \text{Suspense A/c Dr. ₹1,000} \rightarrow \text{To Mahesh's A/c ₹1,000} ]
(e) Cash sales ₹ 2,000 were posted to the debit of sales account as ₹ 5,000
- Correct Entry: [ \text{Cash A/c ₹2,000} \rightarrow \text{To Sales A/c ₹2,000} ]
-
Wrong Effect:
[
\text{Sales A/c ₹5,000} \rightarrow \text{To Cash A/c ₹5,000}
]
- Difference: [ \text{₹5,000 - ₹2,000 = ₹3,000} ]
- Rectification Entry: [ \text{Suspense A/c Dr. ₹3,000} \rightarrow \text{To Sales A/c ₹3,000} ]
Ascertain the Difference in Trial Balance
Summing up the differences for the Suspense Account:
- From (b): ₹3,000
- From (d): ₹1,000
- From (e): ₹3,000
Total Difference in Trial Balance: [ \text{₹3,000 + ₹1,000 + ₹3,000 = ₹7,000} ]
Thus, the total difference in the trial balance is ₹7,000.
Rectify the following errors assuming that a suspense account was opened. Ascertain the difference in trial balance.
(a) Credit sales to Mohan ₹ 7,000 were posted to Karan as ₹ 5,000 .
(b) Credit purchases from Rohan ₹ 9,000 were posted to the debit of Gobind as ₹ 10,000 .
(c) Goods returned to Rakesh ₹ 4,000 were posted to the credit of Naresh as ₹ 3,000 .
(d) Goods returned from Mahesh ₹ 1,000 were posted to the debit of Manish as ₹ 2,000 .
(e) Cash sales ₹ 2,000 were posted to commission account as ₹ 200 .
Let's rectify each error and find the corresponding journal entry using a suspense account. Additionally, we will ascertain the difference in the trial balance.
(a) Credit sales to Mohan ₹ 7,000 were posted to Karan as ₹ 5,000.
Difference: ( 7000 - 5000 = 2000 )
Rectification Entry:
Mohan's A/c Dr. ₹ 7,000
Karan's A/c Cr. ₹ 5,000
Suspense A/c Dr. ₹ 2,000
(b) Credit purchases from Rohan ₹ 9,000 were posted to the debit of Gobind as ₹ 10,000.
Difference: ( 9000 + 10000 = 19000 )
Rectification Entry:
Rohan's A/c Cr. ₹ 9,000
Gobind's A/c Cr. ₹ 10,000
Suspense A/c Dr. ₹ 19,000
(c) Goods returned to Rakesh ₹ 4,000 were posted to the credit of Naresh as ₹ 3,000.
Difference: ( 4000 - 3000 = 1000 )
Rectification Entry:
Rakesh's A/c Dr. ₹ 4,000
Naresh's A/c Dr. ₹ 3,000
Suspense A/c Cr. ₹ 1,000
(d) Goods returned from Mahesh ₹ 1,000 were posted to the debit of Manish as ₹ 2,000.
Difference: ( 1000 + 2000 = 3000 )
Rectification Entry:
Mahesh's A/c Cr. ₹ 1,000
Manish's A/c Cr. ₹ 2,000
Suspense A/c Dr. ₹ 3,000
(e) Cash sales ₹ 2,000 were posted to commission account as ₹ 200.
Difference: ( 2000 - 200 = 1800 )
Rectification Entry:
Cash A/c Dr. ₹ 2,000
Commission A/c Dr. ₹ 200
Suspense A/c Cr. ₹ 1,800
Total Difference in Trial Balance:
Sum of all differences using suspense account: [ 2000 + 19000 + 1000 + 3000 + 1800 ]
[ \begin{array}{c|c|c} +2000 & +19000 & +1000 \ \hline +3000 & +1800 & Total: 26800 \ \end{array} ]
So, the total difference in the trial balance is ₹ 26,800.
Rectify the following errors assuming that suspense account was opened. Ascertain the difference in trial balance.
(a) Credit sales to Mohan ₹ 7,000 were recorded in Purchase Book. However, Mohan's account was correctly debited.
(b) Credit purchases from Rohan ₹ 9,000 were recorded in sales book. However, Rohan's account was correctly credited.
(c) Goods returned to Rakesh ₹ 4,000 were recorded in sales return book. However, Rakesh's account was correctly debited.
(d) Goods returned from Mahesh ₹ 1,000 were recorded through purchases return book. However, Mahesh's account was correctly credited.
(e) Goods returned to Naresh ₹ 2,000 were recorded through purchases book. However, Naresh's account was correctly debited.
To rectify these errors and ascertain the difference in the trial balance, we'll need to pass the appropriate rectification entries using the suspense account.
Error (a)
- Error: Credit sales to Mohan ₹7,000 recorded in the Purchase Book. Mohan's account was correctly debited.
- Wrong Entry:
[ \text{Purchases A/c Dr. ... ₹7,000} ]
- Correct Entry:
[ \text{Sales A/c ......... Cr. ₹7,000} ]
- Rectification Entry:
[ \text{Sales A/c Dr. .... ₹7,000} ] [ \text{To Suspense A/c .... ₹7,000} ]
Error (b)
- Error: Credit purchases from Rohan ₹9,000 recorded in Sales Book. Rohan's account was correctly credited.
- Wrong Entry:
[ \text{Sales A/c Dr. .... ₹9,000} ]
- Correct Entry:
[ \text{Purchases A/c ..... Dr. ₹9,000} ]
- Rectification Entry:
[ \text{Suspense A/c Dr. ....₹9,000} ] [ \text{To Purchases A/c ...... ₹9,000} ]
Error (c)
- Error: Goods returned to Rakesh ₹4,000 recorded in Sales Return Book. Rakesh's account was correctly debited.
- Wrong Entry:
[ \text{Sales Return A/c Dr. .... ₹4,000} ]
- Correct Entry:
[ \text{Purchases Return A/c .... Cr. ₹4,000} ]
- Rectification Entry:
[ \text{Purchases Return A/c Dr. ....₹4,000} ] [ \text{To Suspense A/c ........ ₹4,000} ]
Error (d)
- Error: Goods returned from Mahesh ₹1,000 recorded through Purchases Return Book. Mahesh's account was correctly credited.
- Wrong Entry:
[ \text{Purchases Return A/c Dr. .... ₹1,000} ]
- Correct Entry:
[ \text{Sales Return A/c ........ Dr. ₹1,000} ]
- Rectification Entry:
[ \text{Suspense A/c Dr. ........ ₹1,000} ] [ \text{To Sales Return A/c ...... ₹1,000} ]
Error (e)
- Error: Goods returned to Naresh ₹2,000 recorded through Purchases Book. Naresh's account was correctly debited.
- Wrong Entry:
[ \text{Purchases A/c Dr. .... ₹2,000} ]
- Correct Entry:
[ \text{Purchases Return A/c .... Cr. ₹2,000} ]
- Rectification Entry:
[ \text{Suspense A/c Dr. ........ ₹2,000} ] [ \text{To Purchases A/c ........ ₹2,000} ]
Ascertain the Difference in Trial Balance
Let's now compute the total difference in the trial balance based on the rectification entries required:
[ 7,000 + 4,000 + 1,000 = 12,000 \quad \text{(Effect of incorrectly debited accounts)} ] [ 9,000 + 2,000 = 11,000 \quad \text{(Effect of incorrectly credited accounts)} ]
Total Difference in Suspense Account
[ 7,000 + 4,000 + 1,000 - 9,000 - 2,000 = 1,000 ]
The difference in the trial balance is ₹1,000, which will be reflected in the Suspense Account.
Summary
Therefore, the entries to be made are:
-
Error (a): [ \text{Sales A/c Dr. ₹7,000} ] [ \text{To Suspense A/c ₹7,000} ]
-
Error (b): [ \text{Suspense A/c Dr. ₹9,000} ] [ \text{To Purchases A/c ₹9,000} ]
-
Error (c): [ \text{Purchases Return A/c Dr. ₹4,000} ] [ \text{To Suspense A/c ₹4,000} ]
-
Error (d): [ \text{Suspense A/c Dr. ₹1,000} ] [ \text{To Sales Return A/c ₹1,000} ]
-
Error (e): [ \text{Suspense A/c Dr. ₹2,000} ] [ \text{To Purchases A/c ₹2,000} ]
The total difference of ₹1,000 will balance the suspense account.
Rectify the following errors :
(a) Furniture purchased for ₹ 10,000 wrongly debited to purchases account.
(b) Machinery purchased on credit from Raman for ₹ 20,000 was recorded through purchases book.
(c) Repairs on machinery ₹ 1,400 debited to machinery account.
(d) Repairs on overhauling of secondhand machinery purchased ₹ 2,000 was debited to Repairs account.
(e) Sale of old machinery at book value of $₹ 3,000$ was credited to sales account.
To rectify these errors, we'll need to make the appropriate journal entries:
(a) Furniture purchased for ₹ 10,000 wrongly debited to purchases account:
*Wrong Effect:*
- Purchases A/c Dr. ₹ 10,000 To Cash/Creditors A/c ₹ 10,000
*Correct Effect:*
- Furniture A/c Dr. ₹ 10,000 To Cash/Creditors A/c ₹ 10,000
*Rectification Entry:*
| Furniture A/c | Dr. | ₹ 10,000 |
|---|---|---|
| To Purchases A/c | | ₹ 10,000 |
(b) Machinery purchased on credit from Raman for ₹ 20,000 was recorded through purchases book:
*Wrong Effect:*
- Purchases A/c Dr. ₹ 20,000 To Raman A/c ₹ 20,000
*Correct Effect:*
- Machinery A/c Dr. ₹ 20,000 To Raman A/c ₹ 20,000
*Rectification Entry:*
| Machinery A/c | Dr. | ₹ 20,000 |
|---|---|---|
| To Purchases A/c | | ₹ 20,000 |
(c) Repairs on machinery ₹ 1,400 debited to machinery account:
*Wrong Effect:*
- Machinery A/c Dr. ₹ 1,400 To Cash/Creditors A/c ₹ 1,400
*Correct Effect:*
- Repairs A/c Dr. ₹ 1,400 To Cash/Creditors A/c ₹ 1,400
*Rectification Entry:*
| Repairs A/c | Dr. | ₹ 1,400 |
|---|---|---|
| To Machinery A/c | | ₹ 1,400 |
(d) Repairs on overhauling of secondhand machinery purchased ₹ 2,000 was debited to Repairs account:
*Correct Effect:*
- Machinery A/c Dr. ₹ 2,000 To Cash/Creditors A/c ₹ 2,000
*Rectification Entry:*
| Machinery A/c | Dr. | ₹ 2,000 |
|---|---|---|
| To Repairs A/c | | ₹ 2,000 |
(e) Sale of old machinery at book value of ₹ 3,000 was credited to sales account:
*Wrong Effect:*
- Cash/Debtors A/c Dr. ₹ 3,000 To Sales A/c ₹ 3,000
*Correct Effect:*
- Cash/Debtors A/c Dr. ₹ 3,000 To Machinery A/c ₹ 3,000
*Rectification Entry:*
| Sales A/c | Dr. | ₹ 3,000 |
|---|---|---|
| To Machinery A/c | | ₹ 3,000 |
Each of these rectification entries cancels the incorrect effect and records the correct effect in the accounts.
Rectify the following errors assuming that suspension account was opened. Ascertain the difference in trial balance.
(a) Furniture purchased for ₹ 10,000 wrongly debited to purchase account as ₹ 4,000 .
(b) Machinery purchased on credit from Raman for ₹ 20,000 recorded through Purchases Book as ₹ 6,000 .
(c) Repairs on machinery ₹ 1,400 debited to Machinery account as ₹ 2,400 .
(d) Repairs on overhauling of second hand machinery purchased ₹ 2,000 was debited to Repairs account as ₹ 200 .
(e) Sale of old machinery at book value ₹ 3,000 was credited to sales account as ₹ 5,000 .
Here are the rectifications for the given errors along with the difference in the trial balance:
(a) Furniture Purchase
Error: Furniture purchased for ₹10,000 was wrongly debited to the purchase account as ₹4,000.
Difference: ₹10,000 - ₹4,000 = ₹6,000
Rectification Entry:
Furniture A/c Dr. ₹10,000
To Purchases A/c ₹4,000
To Suspense A/c ₹6,000
(b) Machinery Purchase
Error: Machinery purchased on credit from Raman for ₹20,000 was recorded through the Purchases Book as ₹6,000.
Difference: ₹20,000 - ₹6,000 = ₹14,000
Rectification Entry:
Machinery A/c Dr. ₹20,000
To Purchases A/c ₹6,000
To Suspense A/c ₹14,000
(c) Machinery Repairs
Error: Repairs on machinery ₹1,400 were debited to the Machinery account as ₹2,400.
Difference: ₹2,400 - ₹1,400 = ₹1,000
Rectification Entry:
Repairs A/c Dr. ₹1,400
Suspense A/c Dr. ₹1,000
To Machinery A/c ₹2,400
(d) Overhauling Repairs
Error: Repairs on overhauling of second-hand machinery purchased ₹2,000 was debited to the Repairs account as ₹200.
Difference: ₹2,000 - ₹200 = ₹1,800
Rectification Entry:
Machinery A/c Dr. ₹2,000
To Repairs A/c ₹200
To Suspense A/c ₹1,800
(e) Sale of Old Machinery
Error: Sale of old machinery at book value ₹3,000 was credited to the sales account as ₹5,000.
Difference: ₹5,000 - ₹3,000 = ₹2,000
Rectification Entry:
Sales A/c Dr. ₹5,000
To Machinery A/c ₹3,000
To Suspense A/c ₹2,000
Total Difference in Trial Balance
Adding all the differences together:
₹6,000 + ₹14,000 + ₹1,000 + ₹1,800 + ₹2,000 = ₹24,800
Thus, the difference in the trial balance is ₹24,800.
Rectify the following errors :
(a) Depreciation provided on machinery ₹ 4,000 was not posted.
(b) Bad debts written off ₹ 5,000 were not posted.
(c) Discount allowed to a debtor ₹ 100 on receiving cash from him was not posted.
(d) Discount allowed to a debtor ₹ 100 on receiving cash from him was not posted to discount account.
(e) Bill receivable for ₹ 2,000 received from a debtor was not posted.
To rectify the errors mentioned, we need to pass the necessary journal entries. Here are the rectification entries for each error:
(a) Depreciation provided on machinery ₹ 4,000 was not posted.
Rectification Entry: [ \text{Depreciation A/c} \quad \text{Dr.} \quad \text{₹ 4,000} ] [ \text{To Machinery A/c} \quad \text{₹ 4,000} ]
(b) Bad Debts written off ₹ 5,000 were not posted.
Rectification Entry: [ \text{Bad Debts A/c} \quad \text{Dr.} \quad \text{₹ 5,000} ] [ \text{To Debtor's A/c} \quad \text{₹ 5,000} ]
(c) Discount allowed to a debtor ₹ 100 on receiving cash from him was not posted.
Rectification Entry: [ \text{Discount Allowed A/c} \quad \text{Dr.} \quad \text{₹ 100} ] [ \text{To Debtor's A/c} \quad \text{₹ 100} ]
(d) Discount allowed to a debtor ₹ 100 on receiving cash from him was not posted to discount account.
Rectification Entry: [ \text{Discount Allowed A/c} \quad \text{Dr.} \quad \text{₹ 100} ] [ \text{To Cash A/c} \quad \text{₹ 100} ]
(e) Bill receivable for ₹ 2,000 received from a debtor was not posted.
Rectification Entry: [ \text{Bills Receivable A/c} \quad \text{Dr.} \quad \text{₹ 2,000} ] [ \text{To Debtor's A/c} \quad \text{₹ 2,000} ]
These entries will correct the discrepancies caused by the missing postings.
Rectify the following errors :
(a) Depreciation provided on machinery ₹ 4,000 was posted as ₹ 400 .
(b) Bad debts written off ₹ 5,000 were posted as ₹ 6,000 .
(c) Discount allowed to a debtor ₹ 100 on receiving cash from him was posted as ₹ 60 .
(d) Goods withdrawn by proprietor for personal use ₹ 800 were posted as ₹ 300 .
(e) Bill receivable for ₹ 2,000 received from a debtor was posted as ₹ 3,000 .
Here are the rectification entries for the given errors:
(a) Depreciation provided on machinery ₹ 4,000 was posted as ₹ 400.
Difference: $$ 4000 - 400 = 3600 $$
Rectification Entry:
Depreciation A/c Dr. ₹ 3,600
To Machinery A/c ₹ 3,600
(b) Bad debts written off ₹ 5,000 were posted as ₹ 6,000.
Difference: $$ 5000 - 6000 = -1000 $$
Rectification Entry:
Suspense A/c Dr. ₹ 1,000
To Bad Debts A/c ₹ 1,000
(c) Discount allowed to a debtor ₹ 100 on receiving cash from him was posted as ₹ 60.
Difference: $$ 100 - 60 = 40 $$
Rectification Entry:
Discount Allowed A/c Dr. ₹ 40
To Debtor's A/c ₹ 40
(d) Goods withdrawn by proprietor for personal use ₹ 800 were posted as ₹ 300.
Difference: $$ 800 - 300 = 500 $$
Rectification Entry:
Drawings A/c Dr. ₹ 500
To Purchases A/c ₹ 500
(e) Bill receivable for ₹ 2,000 received from a debtor was posted as ₹ 3,000.
Difference: $$ 2000 - 3000 = -1000 $$
Rectification Entry:
Suspense A/c Dr. ₹ 1,000
To Bills Receivable A/c ₹ 1,000
These entries will correct the errors and bring the accounts back to their accurate balances.
Rectify the following errors assuming that suspense account was opened. Ascertain the difference in trial balance.
(a) Depreciation provided on machinery ₹ 4,000 was not posted to Depreciation account.
(b) Bad debts written-off ₹ 5,000 were not posted to Debtors account.
(c) Discount allowed to a debtor ₹ 100 on receiving cash from him was not posted to discount allowed account.
(d) Goods withdrawn by proprietor for personal use ₹ 800 were not posted to Drawings account.
(e) Bill receivable for ₹ 2,000 received from a debtor was not posted to Bills receivable account.
The errors provided are all one-sided errors, meaning they affect only one account each. Therefore, they will affect the Suspense Account, aiming to balance the trial balance.
Here's how to rectify these errors and the effect on the Suspense Account:
(a) Depreciation provided on machinery ₹4,000 was not posted to the Depreciation account.
Rectification Entry:
Depreciation A/c Dr. ₹4,000
To Suspense A/c ₹4,000
(b) Bad debts written-off ₹5,000 were not posted to Debtors account.
Rectification Entry:
Suspense A/c Dr. ₹5,000
To Debtors A/c ₹5,000
(c) Discount allowed to a debtor ₹100 on receiving cash from him was not posted to discount allowed account.
Rectification Entry:
Discount Allowed A/c Dr. ₹100
To Suspense A/c ₹100
(d) Goods withdrawn by proprietor for personal use ₹800 were not posted to Drawings account.
Rectification Entry:
Drawings A/c Dr. ₹800
To Suspense A/c ₹800
(e) Bill receivable for ₹2,000 received from a debtor was not posted to Bills receivable account.
Rectification Entry:
Bills Receivable A/c Dr. ₹2,000
To Suspense A/c ₹2,000
Ascertain the Difference in Trial Balance
The total impact on the Suspense Account due to these errors is: $$ 4,000 + 5,000 + 100 + 800 + 2,000 = 11,900 $$
Therefore, the difference in the trial balance will be ₹11,900.
Trial balance of Anuj did not agree. It showed an excess credit of ₹ 6,000 . He put the difference to suspense account. He discovered the following errors
(a) Cash received from Ravish ₹ 8,000 posted to his account as ₹ 6,000 .
(b) Returns inwards book overcast by ₹ 1,000 .
(c) Total of sales book ₹ 10,000 was not posted to Sales account.
(d) Credit purchases from Nanak ₹ 7,000 were recorded in sales Book. However, Nanak's account was correctly credited.
(e) Machinery purchased for ₹ 10,000 was posted to purchases account as $₹ 5,000$. Rectify the errors and prepare suspense account.
Rectification Entries
(a) Error: Cash received from Ravish ₹8,000 posted to his account as ₹6,000.
Rectification Entry:
$$
\text{Ravish's A/c Dr. } 2,000 \
\text{To Suspense A/c } 2,000
$$
(b) Error: Returns inwards book overcast by ₹1,000.
Rectification Entry:
$$
\text{Suspense A/c Dr. } 1,000 \
\text{To Returns Inwards A/c } 1,000
$$
(c) Error: Total of sales book ₹10,000 was not posted to Sales account.
Rectification Entry:
$$
\text{Suspense A/c Dr. } 10,000 \
\text{To Sales A/c } 10,000
$$
(d) Error: Credit purchases from Nanak ₹7,000 were recorded in Sales Book. However, Nanak's account was correctly credited.
Rectification Entry:
$$
\text{Purchases A/c Dr. } 7,000 \
\text{Sales A/c Dr. } 7,000 \
\text{To Suspense A/c } 14,000
$$
(e) Error: Machinery purchased for ₹10,000 was posted to Purchases account as ₹5,000.
Rectification Entry:
$$
\text{Machinery A/c Dr. } 10,000 \
\text{To Purchases A/c } 5,000 \
\text{To Suspense A/c } 5,000
$$
Suspense Account
Dr. Side
Date | Particulars | J.F. | Amount |
---|---|---|---|
Balance | Difference as per trial balance | ₹6,000 | |
Returns Inwards A/c | ₹1,000 | ||
Sales A/c | ₹10,000 | ||
Purchases A/c | ₹5,000 |
Cr. Side
Date | Particulars | J.F. | Amount |
---|---|---|---|
Balance | Excess credit | ₹2,000 | |
Ravish's A/c | ₹2,000 | ||
Purchases A/c | ₹7,000 | ||
Sales A/c | ₹7,000 |
Error Location and Rectification Summary
The original difference in the trial balance was ₹6,000, which has been rectified through the adjusting entries and corrections in the ledger accounts.
Trial balance of Raju showed an excess debit of ₹ 10,000 . He put the difference to suspense account and discovered the following errors :
(a) Depreciation written-off the furniture ₹ 6,000 was not posted to Furniture account.
(b) Credit sales to Rupam ₹ 10,000 were recorded as ₹ 7,000 .
(c) Purchases book undercast by $₹ 2,000$.
(d) Cash sales to Rana ₹ 5,000 were not posted.
(e) Old Machinery sold for ₹ 7,000 was credited to sales account.
(f) Discount received ₹ 800 from kanan on playing cash to him was not posted. Rectify the errors and prepare suspense account.
Rectification of Errors
(a) Depreciation Written-off on Furniture Not Posted to Furniture Account
Error: The depreciation on furniture was not posted to the Furniture account.
Rectification Entry:
Depreciation A/c Dr. ₹6,000
To Furniture A/c ₹6,000
(b) Credit Sales to Rupam Recorded as ₹7,000 Instead of ₹10,000
Error: Credit sales to Rupam ₹10,000 were recorded as ₹7,000.
Rectification Entry:
Rupam's A/c Dr. ₹3,000
To Sales A/c ₹3,000
(c) Purchases Book Undercast by ₹2,000
Error: Purchases book was undercast by ₹2,000.
Rectification Entry:
Purchases A/c Dr. ₹2,000
To Suspense A/c ₹2,000
(d) Cash Sales to Rana Not Posted
Error: The cash sales to Rana ₹5,000 were not posted.
Rectification Entry:
Cash A/c Dr. ₹5,000
To Sales A/c ₹5,000
(e) Old Machinery Sold Credited to Sales Account
Error: Old machinery sold for ₹7,000 was credited to the Sales account instead of being recorded correctly.
Rectification Entry:
Sales A/c Dr. ₹7,000
To Machinery A/c ₹7,000
(f) Discount Received Not Posted
Error: The discount received ₹800 from Kanan was not posted in the accounts.
Rectification Entry:
Discount Received A/c Dr. ₹800
To Suspense A/c ₹800
Suspense Account
Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
---|---|---|---|---|
Difference in Trial Balance | 10,000 | |||
[date] | Depreciation A/c | 6,000 | ||
[date] | Rupam's A/c | 3,000 | ||
[date] | Purchases A/c | 2,000 | ||
[date] | Cash A/c | 5,000 | ||
[date] | Sales A/c | 7,000 | ||
[date] | Discount Received A/c | 800 | ||
Balance carried down | 200 | 200 | ||
Total | 10,000 | 10,000 |
The Suspense Account will be closed as all errors have been rectified.
Trial balance of Madan did not agree and he put the difference to suspense account. He discovered the following errors:
(a) Sales return book overcast by ₹ 800 .
(b) Purchases return to Sahu ₹ 2,000 were not posted.
(c) Goods purchased on credit from Narula ₹ 4,000 though taken into stock, but no entry was passed in the books.
(d) Installation charges on new machinery purchased ₹ 500 were debited to sundry expenses account as ₹ 50 .
(e) Rent paid for residential accommodation of madam (the proprietor) ₹ 1,400 was debited to Rent account as ₹ 1,000 .
Rectify the errors and prepare suspense account to ascertain the difference in trial balance.
Rectification Entries
-
Sales return book overcast by ₹ 800
Rectification Entry:
Suspense A/c Dr. ₹ 800 To Sales Return A/c ₹ 800
-
Purchases return to Sahu ₹ 2,000 were not posted
Rectification Entry:
Sahu's A/c Dr. ₹ 2,000 To Purchases Return A/c ₹ 2,000
-
Goods purchased on credit from Narula ₹ 4,000 though taken into stock, but no entry was passed in the books
Rectification Entry:
Purchases A/c Dr. ₹ 4,000 To Narula's A/c ₹ 4,000
-
Installation charges on new machinery purchased ₹ 500 were debited to sundry expenses account as ₹ 50
Rectification Entry:
Machinery A/c Dr. ₹ 450 To Sundry Expenses A/c ₹ 450
-
Rent paid for residential accommodation of Madam (the proprietor) ₹ 1,400 was debited to Rent account as ₹ 1,000
Rectification Entry:
Drawings A/c Dr. ₹ 1,400 To Rent A/c ₹ 1,000 To Suspense A/c ₹ 400
Preparation of Suspense Account
Date | Particulars | J.F. | Dr. ₹ | Cr. ₹ |
---|---|---|---|---|
Difference as per trial balance | 3,650 | |||
To Sales Return A/c | 800 | |||
By Sahu's A/c | 2,000 | |||
By Sundry Expenses A/c | 450 | |||
Drawings A/c | 1,400 | |||
Cleared | ||||
Total | Balance cleared | 3650 |
Trial balance of Kohli did not agree and showed an excess debit of ₹ 16,300 . He put the difference to a suspense account and discovered the following errors:
(a) Cash received from Rajat ₹ 5,000 was posted to the debit of Kamal as ₹ 6,000 .
(b) Salaries paid to an employee ₹ 2,000 were debited to his personal account as ₹ 1200 .
(c) Goods withdrawn by proprietor for personal use ₹ 1,000 were credited to sales account as ₹ 1,600 .
(d) Depreciation provided on machinery ₹ 3,000 was posted to Machinery account as ₹ 300 .
(e) Sale of old car for ₹ 10,000 was credited to sales account as $₹ 6,000$. Rectify the errors and prepare suspense account.
To rectify the errors, we will pass journal entries for each identified error and then prepare the suspense account to ascertain the remaining balance, if any.
Error Rectification Entries
-
Cash received from Rajat ₹ 5,000 was posted to the debit of Kamal as ₹ 6,000:
- Wrong effect: ( \text{Kamal's A/c Dr. ₹ 6,000} )
- Correct effect: ( \text{Rajat's A/c Dr. ₹ 5,000} )
- Rectification:
Rajat's A/c ............Dr. ₹ 5,000 Suspense A/c ............Dr. ₹ 1,000 To Kamal's A/c ............... ₹ 6,000
-
Salaries paid to an employee ₹ 2,000 was debited to his personal account as ₹ 1,200:
- Wrong effect: ( \text{Employee's A/c Dr. ₹ 1,200} )
- Correct effect: ( \text{Salaries A/c Dr. ₹ 2,000} )
- Rectification:
Salaries A/c ............Dr. ₹ 2,000 To Employee's personal A/c.. ₹ 1,200 To Suspense A/c ........... ₹ 800
-
Goods withdrawn by proprietor for personal use ₹ 1,000 were credited to sales account as ₹ 1,600:
- Wrong effect: ( \text{Sales A/c Cr. ₹ 1,600} )
- Correct effect: ( \text{Drawings A/c Dr. ₹ 1,000} )
- Rectification:
Drawings A/c ..................Dr. ₹ 1,000 Suspense A/c ..................Dr. ₹ 600 To Sales A/c ........................ ₹ 1,600
-
Depreciation provided on machinery ₹ 3,000 was posted to Machinery account as ₹ 300:
- Wrong effect: ( \text{Machinery A/c Dr. ₹ 300} )
- Correct effect: ( \text{Depreciation A/c Dr. ₹ 3,000} )
- Rectification:
Depreciation A/c ................Dr. ₹ 3,000 To Machinery A/c ................... ₹ 300 To Suspense A/c .................... ₹ 2,700
-
Sale of old car for ₹ 10,000 was credited to sales account as ₹ 6,000:
- Wrong effect: ( \text{Sales A/c Cr. ₹ 6,000} )
- Correct effect: ( \text{Car/Vehicle A/c Cr. ₹ 10,000} )
- Rectification:
Sales A/c .......................... Dr. ₹ 6,000 Suspense A/c ....................... Dr. ₹ 4,000 To Vehicle A/c ............................. ₹ 10,000
Suspense Account Preparation
Let's summarize and balance the Suspense Account using the corrections above:
Date | Particulars | J.F. | Amount ₹ | Date | Particulars | J.F. | Amount ₹ |
---|---|---|---|---|---|---|---|
Difference in Trial Balance | ₹ 16,300 | Rajat's A/c | ₹ 1,000 | ||||
Salaries A/c | ₹ 800 | ||||||
Sales A/c | ₹ 600 | ||||||
Machinery A/c | ₹ 2,700 | ||||||
Vehicle A/c | ₹ 4,000 | ||||||
Total | ₹ 9,100 |
Conclusion
After rectifying these errors, the remaining difference in the trial balance is ₹ 7,200 ((₹ 16,300 - ₹ 9,100)), which should be investigated further until all errors are discovered and corrected.
Give journal entries to rectify the following errors assuming that suspense account had been opened.
(a) Goods distributed as free sample ₹ 5,000 were not recorded in the books.
(b) Goods withdrawn for personal use by the proprietor ₹ 2,000 were not recorded in the books.
(c) Bill receivable received from a debtor ₹ 6,000 was not posted to his account.
(d) Total of Returns inwards book ₹ 1,200 was posted to Returns outwards account.
(e) Discount allowed to Reema ₹ 700 on receiving cash from her was recorded in the books as ₹ 70 .
Here are the journal entries to rectify the errors assuming that a Suspense Account had been opened:
(a) Goods Distributed as Free Sample ₹ 5,000 were Not Recorded in the Books.
Correct Entry: [ \begin{aligned} \text{Advertisement Account} & \quad \text{Dr} \quad \text{₹ 5,000} \ \quad \text{To Purchases Account} & \quad \text{₹ 5,000} \end{aligned} ]
Rectify Entry: [ \begin{aligned} \text{Advertisement Account} & \quad \text{Dr} \quad \text{₹ 5,000} \ \quad \text{To Suspense Account} & \quad \text{₹ 5,000} \end{aligned} ]
(b) Goods Withdrawn for Personal Use by the Proprietor ₹ 2,000 were Not Recorded in the Books.
Correct Entry: [ \begin{aligned} \text{Drawings Account} & \quad \text{Dr} \quad \text{₹ 2,000} \ \quad \text{To Purchases Account} & \quad \text{₹ 2,000} \end{aligned} ]
Rectify Entry: [ \begin{aligned} \text{Drawings Account} & \quad \text{Dr} \quad \text{₹ 2,000} \ \quad \text{To Suspense Account} & \quad \text{₹ 2,000} \end{aligned} ]
(c) Bill Receivable Received from a Debtor ₹ 6,000 was Not Posted to His Account.
Correct Entry: [ \begin{aligned} \text{Debtor's Account} & \quad \text{Dr} \quad \text{₹ 6,000} \ \quad \text{To Bills Receivable Account} & \quad \text{₹ 6,000} \end{aligned} ]
Rectify Entry: [ \begin{aligned} \text{Debtor's Account} & \quad \text{Dr} \quad \text{₹ 6,000} \ \quad \text{To Suspense Account} & \quad \text{₹ 6,000} \end{aligned} ]
(d) Total of Returns Inwards Book ₹ 1,200 was Posted to Returns Outwards Account.
Correct Entry: [ \begin{aligned} \text{Returns Inwards Account} & \quad \text{Dr} \quad \text{₹ 1,200} \ \quad \text{To Sales Account} & \quad \text{₹ 1,200} \end{aligned} ]
Wrong Effect: [ \begin{aligned} \text{Returns Outwards Account} & \quad \text{Dr} \quad \text{₹ 1,200} \ \quad \text{To Purchases Account} & \quad \text{₹ 1,200} \end{aligned} ]
Rectify Entry: [ \begin{aligned} \text{Returns Inwards Account} & \quad \text{Dr} \quad \text{₹ 1,200} \ \text{Suspense Account} & \quad \text{Dr} \quad \text{₹ 1,200} \ \quad \text{To Returns Outwards Account} & \quad \text{₹ 1,200} \ \quad \text{To Suspense Account} & \quad \text{₹ 1,200} \end{aligned} ]
(e) Discount Allowed to Reema ₹ 700 on Receiving Cash from Her was Recorded in the Books as ₹ 70.
Correct Entry: [ \begin{aligned} \text{Discount Allowed Account} & \quad \text{Dr} \quad \text{₹ 700} \ \quad \text{To Cash Account} & \quad \text{₹ 700} \end{aligned} ]
Wrong Effect: [ \begin{aligned} \text{Discount Allowed Account} & \quad \text{Dr} \quad \text{₹ 70} \ \quad \text{To Cash Account} & \quad \text{₹ 70} \end{aligned} ]
Rectify Entry: [ \begin{aligned} \text{Discount Allowed Account} & \quad \text{Dr} \quad \text{₹ 630} \ \quad & \quad \text{To Suspense Account} & \quad \text{₹ 630} \end{aligned} ]
Trial balance of Khatau did not agree. He put the difference to suspense account and discovered the following errors :
(a) Credit sales to Manas ₹ 16,000 were recorded in the purchases book as $₹ 10,000$ and posted to the debit of Manas as ₹ 1,000 .
(b) Furniture purchased from Noor ₹ 6,000 was recorded through purchases book as ₹ 5,000 and posted to the debit of Noor ₹ 2,000 .
(c) Goods returned to Rai ₹ 3,000 recorded through the Sales book as $₹ 1,000$.
(d) Old machinery sold for ₹ 2,000 to Maneesh recorded through sales book as ₹ 1,800 and posted to the credit of Manish as ₹ 1,200 .
(e) Total of Returns inwards book ₹ 2,800 posted to Purchase account. Rectify the above errors and prepare suspense account to ascertain the difference in trial balance.
Let's go through and rectify each error based on the computations and then tally the suspense account.
Rectifying Errors
(a) Credit sales to Manas ₹ 16,000 recorded in the purchases book as ₹ 10,000 and posted to the debit of Manas as ₹ 1,000:
The correct entries should be:
[ \begin{array}{ccc} \text{Manas's A/c} & \text{Dr.} & \text{16,000} \ \text{To Sales A/c} & & \text{16,000} \ \end{array} ]
Wrong entries recorded:
[ \begin{array}{ccc} \text{Purchases A/c} & \text{Dr.} & 10,000 \ \text{Manas's A/c} & \text{Dr.} & 1,000 \ & & \ \text{Correct Entry required:} & & 7,000 \ \end{array} ]
Correction: [ \begin{array}{ccc} \text{Manas's A/c} & \text{Dr.} & 15,000 \quad \text{(adding the missing debit of $16,000 - 1,000$)} \ \text{To Purchases A/c} & 10,000 & \text{(reverse wrong debit)} \ \text{To Suspense A/c} & 5,000 & \text{(adding difference)} \end{array} ]
(b) Furniture purchased from Noor ₹ 6,000 recorded through purchases book as ₹ 5,000 and posted to the debit of Noor ₹ 2,000:
Correct entries: [ \begin{array}{ccc} \text{Furniture A/c} & \text{Dr.} & 6,000 \ \text{To Noor's A/c} & & 6,000 \ \end{array} ]
Wrong entries recorded: [ \begin{array}{ccc} \text{Purchases A/c} & \text{Dr.} & 5,000 \ \text{Noor's A/c} & \text{Dr.} & 2,000 & (\text{instead of correct ₹ 6,000}) \end{array} ]
Correction: [ \begin{array}{ccc} \text{Furniture A/c Dr.} & 6,000 \text{*Correct debit*} \ \text{To Purchases A/c} & 5,000 & \begin{array}{c}\text{(reverse wrong entry)} \ \end{array}\ \text{Suspense A/c Dr.} & 1,000 & \text{(noor short debit difference)} \end{array} ]
(c) Goods returned to Rai ₹ 3,000 recorded through the Sales book as ₹ 1,000:
Correct entries: [ \begin{array}{ccc} \text{Rai's A/c} & \text{Dr.} & 3,000 \ \text{To Purchase Returns A/c} & & 3,000 \ \end{array} ]
Wrong entries recorded: [ \begin{array}{ccc} \text{Sales A/c} & \text{Dr.} & 1,000 \ \end{array} ]
Correction: [ \begin{array}{ccc} \text{Purchase Returns A/c Dr.} & 3,000 \text{*correct way*} \ \text{To Sales A/c} & 1,000 \ \text{To Suspense A/c} & 2,000 \ \end{array} ]
(d) Old machinery sold for ₹ 2,000 to Maneesh recorded through sales book as ₹ 1,800 and posted to the credit of Manish as ₹ 1,200:
Correct entries: [ \begin{array}{ccc} \text{Maneesh's A/c} & \text{Dr.} & 2,000 \ \text{To Machinery A/c} & & 2,000 \ \end{array} ]
Wrong entries recorded: [ \begin{array}{ccc} \text{Sales A/c} & \text{Dr.} & 1,800 \ \text{Maneesh's same wrong posting} & 1,200 \ \end{array} ]
Correct entries: [ \begin{array}{ccc} \text{Machinery A/c Dr.} & 2,000 \begin{array}{c}\text{reverse credit} \end{array}\ \text{To Purchase Returns A/c} & 1,800 \begin{array}{c}\text{reverse Sales book}\end{array} \ \text{To Manish's A/c} & 1,200 \begin{array}{c}\text{reversed} \end{array}\ \text{To Suspense A/c} & 1400 \ \end{array} ]
(e) Total of Returns inwards book ₹ 2,800 posted to Purchase account:
Correction will simply involve removing the posting from Purchase account and correcting the entry in Return Inwards Account.
Correction: [ \begin{array}{ccc} \text{Return Inwards A/c Dr.} & 2,800\ \text{To Purchase A/c} & & 2,800 \end{array} ]
Suspense Account
The differences calculated: [ \begin{array}{ccc} \text{Different calculated total} & 1400 \end{array} ]
Combining these all together and preparing suspense account tally for differences ###>
Journal Entries for Rectification
(a) Credit sales to Manas ₹ 16,000 recorded in the purchases book as ₹ 10,000 and posted to the debit of Manas as ₹ 1,000:
[ \begin{array}{ccc} \text{Manas's A/c Dr.} & 15,000 & \text{(to correct the short debit)} \ \text{To Purchases A/c} & 10,000 & \text{(to reverse wrong credit)} \ \text{To Suspense A/c} & 5,000 & \text{(balancing figure)} \end{array} ]
(b) Furniture purchased from Noor ₹ 6,000 recorded through purchases book as ₹ 5,000 and posted to the debit of Noor ₹ 2,000:
[ \begin{array}{ccc} \text{Furniture A/c Dr.} & 6,000 & \text{(correct debit)} \ \text{Suspense A/c Dr.} & 1,000 & \text{(balancing figure)} \ \text{To Purchases A/c} & 5,000 & \text{(to reverse wrong credit)} \ \text{To Noor's A/c} & 2,000 & \text{(to correct short credit)} \end{array} ]
(c) Goods returned to Rai ₹ 3,000 recorded through the Sales book as ₹ 1,000:
[ \begin{array}{ccc} \text{Purchases Returns A/c Dr.} & 3,000 & \text{(correct credit)} \ \text{To Sales A/c} & 1,000 & \text{(reverse incorrect debit)} \ \text{To Suspense A/c} & 2,000 & \text{(balancing figure)} \end{array} ]
(d) Old machinery sold for ₹ 2,000 to Maneesh recorded through sales book as ₹ 1,800 and posted to the credit of Manish as ₹ 1,200:
[ \begin{array}{ccc} \text{Sales A/c Dr.} & 1,800 & \text{(reverse incorrect credit)} \ \text{Suspense A/c Dr.} & 200 & \text{(balancing figure)} \ \text{To Maneesh's A/c} & 2,000 & \text{(correct credit)} \end{array} ]
(e) Total of Returns inwards book ₹ 2,800 posted to Purchase account:
[ \begin{array}{ccc} \text{Purchase A/c Dr.} & 2,800 & \text{(reverse incorrect credit)} \ \text{To Suspense A/c} & 2,800 & \text{(correct credit)} \end{array} ]
Suspense Account
[ \begin{array}{|c|c|c|} \hline \text{Date} & \text{Particulars} & \text{Amount (₹)} \ \hline \text{Manas's A/c} & 5,000 & \ \text{Noor's A/c} & 1,000 & \ \text{Sales A/c} & 2,000 & \ \text{Maneesh's A/c} & 200 & \ \text{Purchase C } & 2,800 \ \hline \text{Purchase} & & 11,000 \ \hline \end{array} ]
Total:
Total Difference:
Therefore, the initial difference in the trial balance was ₹ 11,000 (debit).
Trial balance of John did not agree. He put the difference to suspense account and discovered the following errors :
(a) In the sales book for the month of January total of page 2 was carried forward to page 3 as ₹ 1,000 instead of ₹ 1200 and total of page 6 was carried forward to page 7 as ₹ 5,600 instead of ₹ 5,000 .
(b) Wages paid for installation of machinery ₹ 500 was posted to wages account as ₹ 50 .
(c) Machinery purchased from R \& Co. for ₹ 10,000 on credit was entered in Purchase Book as ₹ 6,000 and posted there from to $\mathrm{R} \&$ Co. as $₹ 1,000$.
(d) Credit sales to Mohan ₹ 5,000 were recorded in Purchases Book.
(e) Goods returned to Ram ₹ 1,000 were recorded in Sales Book.
(f) Credit purchases from S \& Co. for ₹ 6,000 were recorded in sales book. However, S \& Co. was correctly credited.
(g) Credit purchases from M \& Co. ₹ 6,000 were recorded in Sales Book as $₹ 2,000$ and posted there from to the credit of M \& Co. as ₹ 1,000 .
(h) Credit sales to Raman ₹ 4,000 posted to the credit of Raghvan as ₹ 1,000 .
(i) Bill receivable for ₹ 1,600 from Noor was dishonoured and posted to debit of Allowances account.
(j) Cash paid to Mani ₹ 5,000 against our acceptance was debited to Manu.
(k) Old furniture sold for ₹ 3,000 was posted to Sales account as ₹ 1,000 .
(1) Depreciation provided on furniture ₹ 800 was not posted.
(m) Material ₹ 10,000 and wages ₹ 3,000 were used for construction of building. No adjustment was made in the books.
Rectify the errors and prepare suspense to ascertain the difference in trial balance.
Here is the rectification of the errors and preparation of the suspense account to ascertain the difference in the trial balance.
(a) Sales Book Errors
- Error 1: Page 2 total carried forward as ₹1,000 instead of ₹1,200.
- Error 2: Page 6 total carried forward as ₹5,600 instead of ₹5,000.
Total difference: $$ (1200 - 1000) + (5600 - 5000) = 800 , \text{(Dr.)} $$
(b) Wages for Installation of Machinery
- Posted to wages account as ₹50 instead of ₹500. $$ 50 - 500 = -450 , \text{(Cr.)} $$
(c) Machinery Purchased
- Entered in Purchase Book as ₹6,000.
- Posted to R & Co. as ₹1,000.
Total difference: $$ (10000 - 6000) + (1000 - 6000) = -1000 , \text{(Cr.)} $$
(d) Credit Sales Recorded in Purchases Book
Correct Effect: $$ Purchases A/c , (Dr.) , 5000 , \text{and} , Mohan , \text{(Cr.)} , 5000 $$
Rectification Entry: $$ Sales A/c , (Dr.) , 5000 \ To Purchases A/c , (Cr.) , 5000 $$
(e) Goods Returned to Ram Recorded in Sales Book
Correct Effect: $$ Sales A/c , (Dr.) , 1000 , \text{and} , Ram , \text{(Cr.)} , 1000 $$
Rectification Entry: $$ Purchases A/c , (Cr.) , 1000 \ To Sales A/c , (Dr.) , 1000 $$
(f) Credit Purchases Recorded in Sales Book
Correct Effect: $$ Sales A/c , (Dr.) , 6000 \ To Purchases A/c , (Cr.) , 6000 $$
Rectification Entry: $$ Purchases A/c , (Dr.) , 6000 \ Sales A/c (Cr.) , 6000 $$
(g) Credit Purchases Recorded and Posted Incorrectly
Difference: $$ 6000 - 2000 , + , 1000 - 2000 = -4000 , \text{(Dr.)} $$ Rectification Entry: $$ Purchases A/c , (Dr.) , 6000 \ Sales A/c (Cr.) , 2000 \ M & Co. , (Cr.) , 1000 \ Suspense a/c (Dr.) , 4000 $$
(h) Credit Sales Posted Incorrectly
Difference: $$ 5435 + 4000 - 1000 = 8435 , \text{(Dr.)} $$ Rectification Entry: $$ Raman A/c , Dr. , (Raghvan A/c) (Cr.) , \text{Only effect of -1,000 on Sales} $$
(i) Bill Receivable Posted Incorrectly
Rectification Entry: $$ Suspense A/c ,(Dr.) , 1,600 \ To Allowances A/c (Cr.) , 1,600 $$
(j) Cash Paid Entered Incorrectly
Difference: $$ 5,000 , (Cr.) , Suspense A/c $$
(k) Sale of Furniture Posted Incorrectly
Correct Entry: $$ Sales A/c (Dr.) \ To Furniture A/c (Dr) $$
(l) Depreciation Provided Not Posted
Rectification Entry: $$ Suspense A/c (Dr.) 800 \ To Depreciation A/c (Dr.) 800 $$
(m) Construction of Building Not Adjusted
Correct treatment:
Material 10000 + Wages 3000 = 13000 (Dr)
Building A/c (Dr) to Material and wages```
*A complete journal entry and suspense account will be prepared inline with these trial balances.*
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Ask Chatterbot AINotes - Trial Balance and Rectification of Errors | Class 11 Financial Accounting 1 | Accountancy
Comprehensive Class 11 Notes on Trial Balance and Rectification of Errors
Understanding Trial Balance
Meaning of Trial Balance
A trial balance is a statement showing the balances of all accounts in the ledger. It is prepared at the end of an accounting period to ensure the arithmetical accuracy of transactions. In essence, it helps verify that every debit entry has a corresponding credit entry, adhering to the double-entry system of accounting.
Objectives of Preparing a Trial Balance
The trial balance is prepared to fulfil several key objectives:
- Arithmetical Accuracy: To ascertain the arithmetical accuracy of ledger accounts.
- Locating Errors: To help in locating errors in the accounting records.
- Preparation of Financial Statements: To aid in the preparation of financial statements such as the Profit and Loss account and the Balance Sheet.
Format of a Trial Balance
A typical trial balance is formatted as follows:
Account Title | L.F. | Debit Balance (£) | Credit Balance (£) |
---|---|---|---|
Cash | 101 | 10,000 | |
Sales | 202 | 15,000 | |
Purchases | 203 | 8,000 | |
Capital | 301 | 5,000 | |
Total | 18,000 | 20,000 |
Significance of a Tallied Trial Balance
A tallied trial balance, one where the total debits equal the total credits, indicates that the ledger accounts are arithmetically accurate. However, it does not guarantee that the ledger itself is free of errors. Certain errors may still exist that do not affect the equality of debits and credits.
Types of Errors in Trial Balance
Errors of Commission
These errors occur due to incorrect recording of transactions, wrong totals, incorrect balancing of accounts, or wrong amounts recorded in the books of original entry. For example, posting £250 instead of £2,500 to a supplier's account.
Errors of Omission
Errors of omission can be either complete or partial:
- Complete Omission: The transaction is entirely omitted from the books of original entry.
- Partial Omission: The transaction is recorded in the books of original entry but not posted to the ledger.
Errors of Principle
These are errors arising from the incorrect classification of receipts and payments between capital and revenue. For instance, treating the purchase of an asset as an expense would be an error of principle.
Compensating Errors
When two or more errors are committed in such a way that they cancel out each other's effect, they are known as compensating errors. For example, overcasting purchases by £500 and undercasting sales by the same amount.
Locating Errors in a Trial Balance
Steps to Identify Errors
- Recasting Totals: Recalculate the totals of the debit and credit columns.
- Comparing Accounts: Compare the account titles and amounts in the trial balance with those in the ledger.
- Verifying Ledger Balances: Recheck the balances of individual ledger accounts.
flowchart TD
A[Start] --> B[Recast Totals]
B --> C[Compare Accounts]
C --> D[Verify Ledger Balances]
D --> E[Identify and Rectify Errors]
E --> F[Trial Balance Tallied?]
F -->|Yes| G[End]
F -->|No| A
Rectification of Errors
Errors Not Affecting the Trial Balance
These errors are rectified by passing a journal entry giving the necessary debit and credit to the affected accounts. For example, if a credit sale of £1,000 is posted as £100, a rectification entry would be:
Debtors A/c Dr. £900
To Sales A/c £900
Errors Affecting the Trial Balance
Errors that affect only one account are rectified using a suspense account. For example, if machinery worth £5,000 is recorded as £500, the rectification entry would be:
Machinery A/c Dr. £4,500
To Suspense A/c £4,500
Examples of Error Rectifications
-
Complete Omission: No journal entry was made for a credit sale of £1,000.
Debtors A/c Dr. £1,000 To Sales A/c £1,000
-
Wrong Posting: £200 cash received is posted as £2,000.
Debtors A/c Dr. £1,800 To Cash A/c £1,800
Preparing Trial Balance
Methods of Preparation
- Totals Method: Totals of debits and credits are used directly.
- Balances Method: Only the balances of accounts are used.
- Totals-cum-Balances Method: A combination of the above two methods.
Step-by-Step Preparation
- Ascertain Balances: Determine the balance of each account in the ledger.
- List Accounts: Place the balance of each account in the appropriate debit or credit column.
- Verify Total Balances: Ensure the total debits equal the total credits.
Role of Suspense Account
Meaning and Utility of Suspense Account
A suspense account is a temporary account used to hold differences in a trial balance until the discrepancies are resolved. It allows the accountant to proceed with the preparation of financial statements even when the trial balance does not tally.
Closing the Suspense Account
Suspense accounts are closed once all errors are identified and rectified. The balances are transferred to the relevant accounts, thereby nullifying the suspense account's impact.
Rectification of Errors in the Next Accounting Year
Errors not identified and rectified before the finalisation of financial statements result in a carried forward suspense account to the next accounting period. The rectification for such errors involves adjusting entries in the profit and loss adjustment account to avoid affecting the income statement of the subsequent period.
Test Your Understanding
Multiple Choice Questions
-
Agreement of trial balance is affected by:
- (a) One-sided errors only.
- (b) Two-sided errors only.
- (c) Both (a) and (b).
- (d) None of the above.
-
Which of the following is not an error of principle:
- (a) Purchase of furniture debited to purchases account.
- (b) Repairs on the overhauling of second-hand machinery purchased debited to repairs account.
- (c) Cash received from Manoj posted to Saroj.
- (d) Sale of an old car credited to the sales account.
Practical Exercises
-
Credit sales to Rajni £5,000 recorded in the Purchases book. This is an error of:
Wrong Entry: Purchases A/c Dr. £5,000 To Rajni's A/c £5,000 Rectification Entry: Rajni's A/c Dr. £5,000 To Purchases A/c £5,000
-
Furniture purchased from M/s Rao Furnishings for £8,000 was entered into the Purchases book.
Wrong Entry: Purchases A/c Dr. £8,000 To M/s Rao Furnishings A/c £8,000 Rectification Entry: Furniture A/c Dr. £8,000 To Purchases A/c £8,000
Summary and Key Terms
Recap of Main Concepts
A trial balance ensures the arithmetical accuracy of ledger accounts and assists in locating errors and preparing financial statements. Common types of errors include errors of commission, omission, principle, and compensating errors. Errors are rectified either directly through journal entries or via a suspense account if they affect only one side of the trial balance.
Important Terms
- Trial Balance: A statement showing the abstract of the balance (debit/credit) of various accounts in the ledger.
- Error of Commission: Errors caused due to wrong recording of a transaction.
- Error of Omission: Errors caused due to omission of recording a transaction entirely or partly.
- Compensating Error: Two or more errors that nullify each other's effect.
- Error of Principle: Errors arising from wrong classification of items.
- Suspense Account: An account used to temporarily store discrepancies in the trial balance.
By grasping these foundational concepts, students will be well-prepared to handle trial balances and rectify errors effectively in their academic studies.
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