Accounting Errors

Journal

No Suspense Account is required because these errors do not affect the agreement of the trial balance.

i. Salary paid Rs. 20,000 wrongly debited to House Rent A/c.

• Wrong entry: House Rent A/c Dr. Rs. 20,000; To Cash A/c Rs. 20,000
• Correct entry: Salary A/c Dr. Rs. 20,000; To Cash A/c Rs. 20,000
• Rectifying entry: Salary A/c Dr. Rs. 20,000; To House Rent A/c Rs. 20,000

ii. Sales book overcast by Rs. 8,000.

• Sales A/c has been credited in excess by Rs. 8,000.
• Rectifying entry: Sales A/c Dr. Rs. 8,000; To Suspense A/c Rs. 8,000

iii. Furniture purchased Rs. 30,000 wrongly debited to Purchase A/c.

• Wrong entry: Purchase A/c Dr. Rs. 30,000; To Cash/Creditor A/c Rs. 30,000
• Correct entry: Furniture A/c Dr. Rs. 30,000; To Cash/Creditor A/c Rs. 30,000
• Rectifying entry: Furniture A/c Dr. Rs. 30,000; To Purchase A/c Rs. 30,000

iv. Goods Rs. 3,000 purchased from Shyam on credit wrongly recorded in Sales Book.

• Wrong entry: Shyam's A/c Dr. Rs. 3,000; To Sales A/c Rs. 3,000
• Correct entry: Purchase A/c Dr. Rs. 3,000; To Shyam's A/c Rs. 3,000
• Rectifying entry:
  • Purchase A/c Dr. Rs. 3,000
  • Sales A/c Dr. Rs. 3,000
  • To Shyam's A/c Rs. 6,000

Working note for (iv): Shyam's A/c was wrongly debited by Rs. 3,000. To cancel this wrong debit and give the correct credit of Rs. 3,000, Shyam's A/c must be credited by Rs. 6,000 in total. Sales A/c was wrongly credited by Rs. 3,000, so it is debited by Rs. 3,000 to cancel that excess credit. Purchase A/c is debited by Rs. 3,000 to record the correct purchase.

Rectifying entries

(i) Wages were debited to House rent by mistake, so wages must be debited and house rent credited.

(ii) The purchase book total was over-cast, so the Purchase account is too high; it is reduced and the difference goes through the Suspense account.

(iii) Furniture is an asset, not a purchase of goods.

(iv) Wrong entry: Purchase A/c Dr. and Sudha A/c Cr. Rs 6,000. Correct entry: Sudha A/c Dr. and Sales A/c Cr. Rs 6,000. To correct it, Sudha is debited twice (once to cancel the wrong credit, once for the real sale), and both Purchase and Sales are credited.

Rectifying entries

(i) Machinery is an asset and must not be shown under Purchase.

(ii) Salary paid to Ram is an expense, not a payment on his personal account.

(iii) A computer is a fixed asset.

(iv) Wrong entry: Hari A/c Dr. and Sales A/c Cr. Rs 5,000. Correct entry: Purchase A/c Dr. and Hari A/c Cr. Rs 5,000. Hari is credited twice (cancelling the wrong debit and recording the real credit purchase), while Sales is debited to cancel the wrong credit and Purchase is debited.

Rectifying entries (errors located after preparation of trial balance)

(i) Credit purchase from Adhishree Rs 20,000 wrongly recorded in the sales book

Wrong entry made: Adhishree A/c Dr. 20,000 and Sales A/c Cr. 20,000. Correct entry: Purchase A/c Dr. 20,000 and Adhishree A/c Cr. 20,000.

Adhishree's account is credited with Rs 40,000: Rs 20,000 cancels the wrong debit and Rs 20,000 is the correct credit.

(ii) Interest paid Rs 5,000 wrongly debited to Salary A/c

(iii) Sales Rs 10,000 recorded as Rs 1,000

(iv) Purchase return book over-costed by Rs 5,000

Rectifying entries (errors detected before preparation of trial balance)

In (iv), Dipesh's account was wrongly debited and Sales wrongly credited, so Dipesh is credited and Sales debited to cancel them; the purchase is then recorded correctly against Dinesh.

Rectifying entries

(a) Wages on installation of machinery are a capital expense and form part of the machinery cost.

(b) Commission received was credited to the wrong income account.

(c) Salary was over-cast, so the debit side of the Salary account is too high by Rs 2,000.

(d) Sales were recorded as Rs 80,000 instead of Rs 8,000, so Sales and the customer's account are both overstated by $80{,}000 - 8{,}000 = 72{,}000$.

Rectifying entries

(ka) The sales book was over-cast, so the Sales account is credited by Rs 2,000 too much.

(kha) Wrong entry: Purchase A/c Dr. and Ram A/c Cr. Rs 5,000. Correct entry: Ram A/c Dr. and Sales A/c Cr. Rs 5,000. Ram is debited twice, and Purchase and Sales are each credited.

(ga) Depreciation was recorded Rs 300 instead of Rs 3,000, so it is short by $3{,}000 - 300 = 2{,}700$.

(gha) Wages for installing machinery are a capital item.

Rectifying entries

(a) Sale of an old machine is not a sale of goods; the credit belongs to the Machinery account.

(b) Wrong entry: Dinesh A/c Dr. and Sales A/c Cr. Rs 3,000. Correct entry: Purchase A/c Dr. and Dinesh A/c Cr. Rs 3,000. Dinesh is therefore credited twice, and Purchase and Sales are each debited.

(c) Free samples are an advertising expense, and the goods leave the stock of purchases. The transaction was not recorded at all, so the full entry is made now.

(d) The purchase book was over-recorded, so Purchase is debited Rs 5,000 too much.

Rectification Entries

Note: Errors (a) and (b) affect both sides equally, so no suspense account is required. Errors (c) and (d) are one-sided errors; hence, the other side is taken to Suspense A/c. The net balance of Suspense A/c will be Rs 13,000 credit (18,000 credit – 5,000 debit).