Page 225 - ISCDEBK-XI

Rectification of Errors 21.13
EFFECT OF RECTIFICATION OF ERRORS ON NET PROFIT
Items (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Total
Increase (`) ... ... 1,500 ... 700 1,000 ... ... ... 2,000 5,200
Decrease (`) 100 ... ... 450 ... ... 1,000 ... ... ... 1,550
Net Increase in Profit = ` 3,650

Illustration 10.
Following errors were identified in the accounts of Sohan Lal & Sons for the year ended
31st March, 2022:
(i) A builder’s bill for ` 27,000 for the erection of a small shed was debited to Repairs Account.
(ii) A cheque for ` 3,000 received from Rahim Bux & Co. was dishonoured and debited to
Trade Expenses Account.
(iii) Goods to the value of ` 1,500 returned by Gupta Bros. were included in stock, but no
entry was made in the books.
(iv) Repairs to plant amounting to ` 5,670 had been charged to Plant and Machinery Account.
(v) Wages paid to the firm’s own workmen for making certain additions to machinery
amounting to ` 5,500 were posted to Wages Account.
(vi) A cheque for ` 750 received from Lala Ram was credited to the account of Sita Ram and
debited incorrectly to Cash Account.
(vii) A sum of ` 1,000 drawn by the proprietor for personal use was debited to Travelling
Expenses Account.
Pass Journal entries to rectify these errors. Which of these errors, if any, will cause disagreement
of the Trial Balance? Give reasons for your answer.
Solution: (i) In the Books of Sohan Lal & Sons
RECTIFTYING JOURNAL ENTRIES
Date Particulars L.F. Dr. (`) Cr. (`)
(i) Building A/c ...Dr. 27,000
To Repairs A/c 27,000
(Being a builder’s bill for the erection of a small shed wrongly debited
to Repairs Account, now corrected)
(ii) Rahim Bux & Co. ...Dr. 3,000
To Trade Expenses A/c 3,000
(Being a cheque received from Rahim Bux & Co. got dishonoured and was
wrongly debited to Trade Expenses Account, now rectified)
(iii) Returns Inward A/c ...Dr. 1,500
To Gupta Bros. 1,500
(Being goods returned by Gupta Bros. omitted to be recorded, now recorded)
(iv) Repairs A/c ...Dr. 5,670
To Plant and Machinery A/c 5,670
(Being repairs to plant and machinery wrongly debited to Plant and
Machinery Account, now corrected)
(v) Plant and Machinery A/c ...Dr. 5,500
To Wages A/c 5,500
(Being wages paid for making certain additions to machinery wrongly
debited to Wages Account, now rectified)