Rectification Of Accounting Errors
April 17, 2023
Accountants prepare test accounts to make sure they are accurate. If the total debit and credit balances are not equal it could be that the accounts have not been correctly recorded in the books. It is crucial that errors are identified and corrected before we move on to final accounts. It is not possible to find all errors in the trial balance. Some errors are not reflected in the trial balance. These errors are not easy to identify with the trial balance. Before an accountant prepares trading and profit & Loss account balance sheets, he must correct both. If they are not corrected, they won’t give the correct more results. Actual profit and loss will not be disclosed by them.
Accounting errors can also be classified as:
1. Principle errors
When transactions are recorded that violate the fundamental principles, it is called an error in principle. Here’s an example: Revenue spending could be treated the same way as capital expenses.
2. Clerical Errors
These errors might be further sub-divided.
(iii). Errors resulting from omission
An error or neglect is when a transaction is not fully or partially recorded in a book. This could be due either to the omission of a transaction being recorded in books or original entries, as well as the omission that a transaction has been posted to the accounts.
(iii. Errors during commission
An entry that is not correctly entered can cause casting, calculation error, casting or balance problems. Some Commission errors affect the trial balance while others do not. A trial balance allows you reveal any errors that could cause a decrease in the trial amount.
(iii) Compensating errors
Sometimes an error is counterbalanced in way that isn’t visible from the trial balance. These are known as compensating and reversible error.
You can divide the rectification of errors into two groups.
(a.) Account-specific mistakes
(b). Multiple accounts can be affected by an error
An error can affect one account
Errors can affect:
(a) Casting errors;
(b). Error while posting
(c), Carry it on
(e). Exclusion from trial balance
These errors need to be corrected immediately. These errors should be reported in a journal or an explanation note.