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C H A P T E R

Rectification of Errors

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Trial Balance Trial Balance is a statement showing balances of various accounts in the
ledger and the Cash Book at a particular date.
2. One-sided Errors Errors that affect the debit or credit side of an account.
3. Two-sided Errors Errors that affect two or more accounts.
4. Error of Recording It means recording the entry in subsidiary books wrongly.
5. Error of Posting It means an entry being not posted at all or partially or being posted by
wrong amount or to the wrong account.
6. Error of Balancing It means calculating the balance in account wrongly.
7. Error of Casting It means a mistake committed in totalling.
8. Error in Carrying Forward It means a mistake committed in carrying forward the total of one page
to the next page.
9. Error of Principle It means recording a transaction in the books of account which is
not in accordance with the accounting principles.This error involves
an incorrect allocation of expenditure or receipt between Capital
and Revenue.
10. Error of Omission It means an error committed whereby a transaction is omitted to be recorded.
11. Error of Commission Error caused by wrong recording of transactions.
12. Compensating Errors Errors that compensate each other.
13. Suspense Account It is an account opened to temporarily tally the Trial Balance.
14. Rectifying Entries Entries made in books of account for correction of errors.

CHAPTER SUMMARY

• Trial Balance is prepared to check the arithmetical accuracy of the posting into the ledger accounts.
The two sides of the Trial Balance must be equal, i.e., the total of debit side must be equal to total of credit side.
Disagreement of a Trial Balance means that there are errors in books of account. Some of the errors affect
the agreement of the Trial Balance and are disclosed by the Trial Balance.
• Errors which affect the Trial Balance
(i) Posting of one aspect of the Journal entry in the Ledger.
(ii) Posting a Journal entry on the wrong side of an account.
(iii) Wrong total of subsidiary books.
(iv) Posting correct amount in one account and wrong amount in the other account.
(v) Wrong totalling or balancing of a Ledger account.
(vi) Omission to enter an account balance in the Trial Balance.
(vii) Balance of an account written in the wrong column in the Trial Balance.
• Errors which do not affect Trial Balance
(i) Errors of principle.
(ii) Compensating errors.
(iii) Error of complete omission.
(iv) Posting correct amount and on the correct side but in the wrong account.