📊 Rectification of Errors in Accounting

What is Rectification of Errors?

In accounting, errors can occur while recording transactions. Rectification of errors means correcting those mistakes in the books of accounts.

🔍 Types of Errors & How to Correct Them

Type of Error	Meaning	Example	Rectification Entry
1️⃣ Errors of Omission	Transaction is not recorded in books.	A purchase of ₹10,000 is completely missed from records.	Pass the missing entry: 🔹 Purchases A/c Dr ₹10,000 🔹 To Supplier A/c ₹10,000
2️⃣ Errors of Commission	Wrong amount entered in correct account.	Cash received ₹5,000, but recorded as ₹500.	🔹 Cash A/c Dr ₹4,500 🔹 To Customer A/c ₹4,500
3️⃣ Errors of Principle	Wrong account category used.	Machinery purchased ₹50,000 recorded as expense (instead of an asset).	Reverse incorrect entry and pass the correct one: 🔹 Machinery A/c Dr ₹50,000 🔹 To Expenses A/c ₹50,000
4️⃣ Errors of Original Entry	Wrong amount recorded in both debit & credit sides.	Salary paid ₹15,000 but entered as ₹10,000.	Correct by adjusting the difference: 🔹 Salary A/c Dr ₹5,000 🔹 To Cash A/c ₹5,000
5️⃣ Compensating Errors	Two or more errors cancel each other out.	Sales ₹20,000 under-recorded, while expenses ₹20,000 under-recorded too.	Correct both entries separately.

📌 Example: Rectification of an Incorrect Entry

Problem:

👉 Rent paid ₹8,000 was wrongly debited to Salaries A/c instead of Rent A/c.

Wrong Entry Passed:

css
Salaries A/c       Dr ₹8,000  
To Cash A/c          ₹8,000

Correct Rectification Entry:

css
Rent A/c            Dr ₹8,000  
To Salaries A/c     ₹8,000  
(Being wrong entry rectified)

🔄 Two Methods of Rectification

1️⃣ Before Preparing Trial Balance:

Simply reverse the wrong entry and pass the correct one.

2️⃣ After Preparing Trial Balance:

Use a Suspense Account to adjust errors temporarily.

🎯 Key Takeaways

✅ Rectification of errors ensures accurate financial records.
✅ Errors can occur due to omission, commission, principle, wrong entry, or compensating errors.
✅ Some errors require reversing the incorrect entry and posting the correct one.
✅ If errors are found after trial balance, use a Suspense Account.

📊 Rectification of Errors in Accounting