Rectificaiton of Error
Recording of transaction in Journal and posting them into ledger cannot be made error free. Few errors are bound to be committed while recording or posting the transactions which affect the final accounts of enterprises. So, it becomes very important to identify the errors and rectify them so that the correct and true financial position is ascertained. Errors should be rectified as soon as they are identified. As the accountant cannot change the figures and entries already posted, a procedure has to be followed to rectify the errors.
TYPES OF ERRORS
Errors of Omission: Error of omission arises due to some act of omission on the part of the person who is responsible for the maintenance of books of account. This error can be error of
• Complete Omission
• Partial Omission
Errors of Commission: Errors of Commission arises when there is an error while recording an entry in Journal, posting in ledger or balancing transactions in Trail Balance, income statement or Financial Statement. Following are few examples of Errors of Commission.
• Error in Balancing the Account in ledger
• Mistake in amount while posting in ledger
• Error in casting subsidiary books
Compensating Errors: Compensating Errors do no effect matching of the trial balance. Compensating Errors are neutralizing in nature, hence one error is compensated by other error or errors of opposite nature.
ERRORS OF PRINCIPLE
Errors Of Principle occur due to violation of certain principles of accounting in recording journal transactions.
EFFECT OF ERRORS ON TRAIL BALANCE
All the errors do not effect the matching of trail Balance, matching of trail balance only shows the mathematical accuracy. There are certain errors due to which there will be no effect on matching of trail balance.
Errors Disclosed By Trial Balance
• Error in casting subsidiary books.
• Error in carrying forward the total of one page the next page.
• Error in totaling the trial balance.
• Error in posting from book of subsidiary record to ledger.
• Error in balancing an account.
• Error in preparation of debtors’ schedule and creditors’ schedule.
• Error in carrying a balance of an account to the trial balance.
• Omission of casting etc.
• Posting an amount on the wrong side of a ledger account.
• Double posting to an account.
Errors Not Disclosed By Trial Balance
• Errors of Complete Omission
• Errors of Commission
• Compensatory Errors
• Errors of Principle
• Recording Wrong Amount in Subsidiary Book
• Errors of Duplication
These online MCQ Mock tests and MCQ questions includes all main concepts of the chapter (Rectification of Error) in CS foundation Financial Accounting and Auditing.