has been
cheque of 500 issued to the Suppliers account (shown under lade bay
has been wrongly debited to the purchases.
16 A credit sale of 50 has been credited to the Sales and also to the Trade receivables Account
Answers
Answer:
This is an error of commission.
While recording business transactions, some errors are committed.There are 4 kinds of errors, namely;
Error of Principle
The error of Commission.
Error of Omission
Compensatory Error.
These errors have to be corrected before finalization of account. The process of correcting these errors is known as Rectification of Errors.
Two-sided errors refer to those errors that do not affect the agreement (tallying) of the trial balance.
Machinery purchased recorded in the purchases book.
Old furniture sold is recorded as sales of goods.
Errors due to partial omission is an example of one-sided error.
Trial balance is a statement that is prepared to make sure that the transactions for a particular period have been duly recorded in the journal and properly posted to the relevant ledger accounts. It has debit and credit columns to record the balances extracted from ledger accounts with a view to test the arithmetical accuracy of the books of accounts. Under balance method the following procedure is adopted to draw up a trial balance:
First of all the name of all accounts is written along with serial number.
The total balances of all accounts are taken and debit balances are written in the debit column & credit balances in the credit column in the Trial Balance.
The total of debit & credit columns of the Trial Balance is calculated. Total of both columns of Trial Balance should be equal.
Journal
Date Particulars L/F Debit
Amount
(Rs)
Credit
Amount
(Rs)
Suspense A/c
To Manohar’s A/c
(Being the sales of goods-wrongly over-debited to customer, now rectified)
Dr 4,950 4,950
Purchase Return A/c
To Suspense A/c
(Being the error in carrying forward of total of purchases return book, now rectified)
Dr 100 100
A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger account could not be determined at the time that the transaction was recorded.
Rectification Journal Entries
In all the given cases, one-sided errors can be discovered as there has been an overcasting of the accounts. Therefore, the rectification has been done by reversing the accounts opposite to their normal balance.
Rectifying Entries
(Being goods sold to Mr. X, wrongly posted to Mr.Y, now corrected.)
A journal is a detailed account that records all the financial transactions of a business, to be used for future reconciling of and transfer to other official accounting records, such as the general ledger. Manual systems usually had a variety of journals such as a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and a general journal.
In the books of Vishal
Journal entries
(Being furniture purchased from Vijay and cheque issued to him)
A ledger is the principal book or computer file for recording and totalling economic transactions measured in terms of a monetary unit of account by account type, with debits and credits in separate columns and a beginning monetary balance and ending monetary balance for each account.
A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization’s general ledger accounts. (Often the accounts with zero balances will not be listed.) The debit balance amounts are listed in a column with the heading “Debit balances” and the credit balance amounts are listed in another column with the heading “Credit balances.” The total of each of these two columns should be identical.
The trial balance is not a financial statement. It is mainly an internal report that is/was useful in a manual accounting system. If the trial balance did not “balance” it signaled an error somewhere between the journal and the trial balance. Often the cause of the difference was a miscalculation of an account balance, posting a debit amount as a credit (or vice versa), transposing digits within an amount when posting or preparing the trial balance, etc.
Today’s accounting software has been written to eliminate those errors. Hence, the trial balance is less important for bookkeeping purposes since it is almost certain that the general ledger and the trial balance will have the debits equal to the credits.
The trial balance continues to be useful for auditors and accountants who wish to show 1) the general ledger account balances prior to their proposed adjustments, 2) their proposed adjustments, and 3) all of the account balances after the proposed adjustments. The adjusted amounts make up the adjusted trial balance and the adjusted amounts will be used in the organization’s financial statements.