Page 127 - debkxi

17.2 Double Entry Book Keeping—CBSE XI

(iv) Posting correct amount and on the correct side but in the wrong account.
(v) Recording wrong amount in the books of the original entry.
(vi) Recording both aspects of a transaction twice in the books of account.
• Types of Errors
(i) Errors of Principle: when transactions are recorded in contravention of accounting
principles.
(ii) Error of Omission: If a transaction is omitted from being recorded completely or partially,
it is known as an error of omission.
(iii) Error of Commission: Transaction wrongly written in the Subsidiary Book or in the
Ledger or wrong posting or wrong balancing is known as error of commission.
(iv) Compensating Error: When an error is committed and it is nullified by another error,
it is known as a compensating error.
• Errors may be such as affect only one account—one-sided errors or they affect both the
accounts—two-sided errors.
• Suspense Account: In order to avoid the delay in the preparation of Final Accounts, the
difference in the Trial Balance is put to Suspense Account (which is an account of a temporary
nature). When errors are located entries are passed with the help of Suspense Account and when
all errors affecting the Trial Balance are located and rectified the Suspense Account stands closed.

Solved Questions

1. Rectify the following errors:
(i) Acquisition charges on the purchase of a new building amounting to ` 5,000
were debited to the Sundry Expenses Account.
(ii) Outstanding telephone charges of ` 2,000 had been completely omitted.
(iii) Material from store of ` 2,000 and wages ` 500 (out of the total wages bill of
factory) had been used in making tools and implements for use in own factory
but no adjustments were made in the books.
Solution: RECTIFYING JOURNAL ENTRIES
Date Particulars L.F. Dr. (`) Cr. (`)
(i) Building A/c ...Dr. 5,000
To Sundry Expenses A/c 5,000
(Rectification of wrong debit to Sundry Expenses A/c for acquisition
charges on purchase of new building)
(ii) Telephone Charges A/c ...Dr. 2,000
To Outstanding Telephone Charges A/c 2,000
(Outstanding telephone charges omitted to be recorded, now recorded)
(iii) Tools and Implements A/c ...Dr. 2,500
To Purchases A/c 2,000
To Wages A/c 500
(Materials and wages used in making tools, omitted to be
recorded, now recorded)
2. Rectify the following errors:
(i) A credit purchase of ` 1,040 from Ramesh was passed in the books as ` 1,400.
(ii) Goods (Cost ` 5,000; Sales Price ` 6,000) distributed as samples among
prospective customers were not recorded.
(iii) Wages paid to the firm’s workmen for making additions to machinery
amounting to ` 350 were debited to the Wages Account.