Competitive Exams: Financial Accounting (Part 2 of 4)

Rectification of errors: Rectification of errors is very tough work. It is main duty of chartered accountant of any country. A lot of errors can be done by accountant. So C. A. Audits the full accounts and if he see any error, his duty to see that why it happen and how can rectify this so that profit or loss or financial position do not affect of this happenings.

To day my main aim is not write just article on this topic but actually, I want to give you simple way to correct your accounts error forever. Read following lines very seriously and concentrately

  1. first of find out your error and mistake from accounts

  2. write what is the mistake or incorrect journal entry or incorrect accounts. This error may affect one account or two account note it.

  3. Write correct journal entry or make correct account in rough page

  4. in rough page, you will also have to do treatment of your mistake suppose you wrote 1000Rs. As sake instead of RS. 2000 sale which was correct.

Its wrong is journal entry

  • cash account Dr. 1000
  • To Sale account 1000
  • In rough paper you should also write correct journal entry
  • Cash account Dr. 2000
  • To sale account 2000
  • Then now your are analyst you should see that 1000 is less in both side so for making the correctness pass another journal entry of 1000 Rs.
  • Cash account Dr. 1000
  • To Sale Account 1000
  • This entry is called rectify entry.

Simple method of rectification of error

I am writing very simple method for correcting the mistakes and error in books of accounts

All work must be done on rough paper or notepad. There are the part of working notes.

  • Ist step: What is the mistake or error. Write it as wrong record of ledger accounts or wrong journal entry.
  • 2nd step: What should be the correct entry or what should record which is correct according to the nature of error of accounting. Write it in second step
  • 3rd step: Best rectification of error or write the rectification entry in such a way so that difference will be auto correct.

I take an example, XYZ co. Purchased machinery of $5000 but by mistake this amount was debited in purchase account.

Ist step

  • Wrong entry
  • Purchase account debit $5000
  • Cash Account Credit $5000

2nd step

  • Correct entry
  • Machinery Account Debit $5000
  • Cash Account Credit $5000

3rd Step

  • Rectification of error entry
  • Machinery account Debit $5000
  • Purchase account Credit $5000