Explain any two types of errors that are disclosed by trial balance with examples and rectification entry.

Q. Explain any two types of errors that are disclosed by trial balance with examples and rectification entry.

Note – Avoid giving examples given in the self- learning material.

 

Answer:

 

An error is an unintentionally committed mistake. When the Trial Balance does not tally it is a clear indication that there are some errors in the preparation of accounts. The errors may be committed at various stages

  • Journalizing,
  • Posting,
  • Casting (totaling),
  • Balancing,
  • Transferring to trial balance and so on.

Mere tallying of the trial balance does not ensure an error free statement. There are certain errors such as errors of omission, error of principle and compensating errors are not disclosed by trial balance while errors of casting, posting to wrong side of an account or posting a wrong amount can be detected by trial balance.

Errors whether disclosed or not disclosed by trial balance, have to be corrected or rectified in order to obtain the correct picture of profit or loss. It should be remembered that errors will have their impact not only on profit but also on the asset and liability position of the business organization.

Posting a wrong amount: This mistake may occur while posting an entry from subsidiary book to ledger.

Example: Cash received from Krupa Rs. 1250 is posted to Krupa’s ledger account Rs. 1520, while it’s correct posted in cash a/c

Rectification entry:

Krupa account                          Dr.  Rs. 270

To Suspense a/c                           Rs. 270

Being excess credit given to Krupa a/c rectified.

Omitting to post an entry from subsidiary book to ledger: If an entry made in the   subsidiary book does not get posted to ledger, the trial balance does not tally.

Example: Stationery bill paid Rs.2000 recorded in cash account but is not posted to Stationery account at all.

Rectification entry:

Stationery account                         Dr.  Rs. 2000

To Suspense a/c                                  Rs. 2000

Being excess credit given to Krupa a/c rectified.

 

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