Maharashtra Board Class 11 Book Keeping and Accountancy Chapter 8 Rectification of Errors PDF Download

Rectification Of Errors

Contents

8.1 Meaning & Effects Of Errors

8.2 Types Of Errors

8.3 Detection & Rectification Of Errors

8.4 Preparation Of Suspense Accounts

Competency Statements

Students will know the meaning and effects of Rectification of Errors.

Students will know the different Types of Errors and their examples.

Students are able to detect the errors and rectify them.

Students will learn the meaning and need of Suspense Account.

Students will know how to maintain Suspense Account.

8.1 Introduction And Meaning

In the previous chapter we have learnt that a Trial Balance is prepared to check the arithmetic accuracy of transactions recorded in a Journal posting them into the ledger and balancing the ledger account. If a Trial Balance agrees it is assumed that recording posting etc. have been done correctly. But this is only partly correct because even if Trial Balance agrees there may be some errors in the accounting records.

Teacher's Note

A Trial Balance is like a checking tool in accounting. It is like checking if your school register shows the correct number of present and absent students.

Exam Trick

Remember: Trial Balance agrees does not always mean there are NO errors. Some errors can hide even when Trial Balance matches.

Points to Remember

Trial Balance checks if debit and credit sides are equal.

Equal Trial Balance does not mean all accounting is correct.

Some errors are hidden even when numbers match.

We must find and fix these hidden errors.

Accuracy is assured only when there are no errors in the books of accounts. To confirm accuracy errors are identified and rectified. Many business units have shifted from manual accounting to computerized accounting. Yet errors in accounting are unavoidable. Hence errors are to be located and rectified to find out the real profit or loss and financial position.

Reasons Of Errors

1. Lack Of Accounting Knowledge

2. Wrong Data Collections

3. Wrong Recording

4. Incorrect Arithmetical Calculations

Need Of Rectification

1. For the preparation of correct Accounting Entries/Records.

2. Preparation of Profit & Loss Account with corrected figures to finalize correct Profit and Loss.

3. To find out the accurate financial position of the firm/enterprise by preparing Balance Sheet with corrected figures.

Types Of Errors

While writing the Books of Accounts it is likely that some mistakes are committed and they are required to be corrected. Errors can be classified in the following four categories.

Teacher's Note

There are four main types of errors in accounting. Think of them like four types of mistakes you can make in your mathematics homework.

Exam Trick

Remember: Error of Omission = forgot to write. Error of Commission = wrote wrong. Error of Principle = broke the rule. Compensating = two mistakes cancel each other.

Points to Remember

Errors of Omission happen when we forget to record a transaction.

Errors of Commission happen when we record something wrong.

Errors of Principle happen when we break accounting rules.

Compensating errors are when two mistakes cancel out.

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