Rectification of errors
- 1. Rectification of errors Presented by Harshit kushwah Mohit kumar Ronak sen Akash narwariya Presented to Sr. Asst. prof. Dr.Amitabha maheshwari
- 2. Introduction •Rectification of errors in financial accounting is the process of identifying, correcting, and preventing errors in financial statements and records
- 3. identification of errors Financial errors can occur due to a variety of reasons such as data entry mistakes, calculation errors, or oversight. It's essential to have internal controls and procedures in place to detect errors early. Auditing and reviewing financial statements regularly can also help to identify errors.
- 4. Types of errors Two sided errors Errors of comission Errors of orignal entry Errors of principal (not affecting the trial balance agreement) One sided errors Suspense Account (Affecting the trial balance agreement)
- 5. Errors of commission It mean that a transaction instead of being record in the right account, has been recorded in the wrong account on the same class. Correct entry wrong entry rectify entry A 3000 B 3000 A 3000 To sales 3000 To sales 3000 B To sales 3000 A sale of rs.3000 to A was wrongly debited to the account of B
- 6. Two sided errors Errors of original entry It means that the amount of a transaction has been wrongly recorded in the journal and the same wrong amount was also posted in the ledger
- 7. example Goods sold to Mr. Naeem for rs 5000 was wrongly recorded in the sales journal at rs 500 And the same amount of rs 500 is posted both in the Mr. Naeem A/c and in sales A/c Correct entry wrong entry rectify entry Mr. naeem 5000 Mr. naeem 500 Mr. naeem 4500 To sales 5000 To sales 500 To sales 4500
- 8. Errors of principle Errors of principle mean errors caused due to violation of generally accepted accounting principles e.g. incorrect allocation between capital and revenue items. Treating capital expenditure as a revenue expenditure. Treating revenue expenditure as a capital expenditure.
- 9. Example •Paid wages on installation of new machinery on rs. 10,000 but recorded as a wages expenses Correct entry wrong entry recify entry Machinery 10,000 wages exp. 10,000 machinery 10,000 cash 10,000 cash 10,000 wages exp. 10,000
- 10. One sided errors When these words like wrongly debited wrongly credit and posted are used in any statements then there is error in one account. This is called One sided errors.
- 11. Advantages of rectification of errors With rectification of errors, we can show of financial statements correctly. We can save other interested parties from mislead. Rectification of errors will also helpful for good managerial decisions. You know that one branch of accounting is management accounting which provides useful information to management. All its raw data comes from financial accounting. If it will be incorrect, accounting information will be wrong and decision on these accounting information will also be wrong. Wrong decision will always increase the big loss of company.
- 12. Thank you hugug
Editor's Notes
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