RECTIFYING ACCOUNTING ENTRIES
The errors committed in the books of accounts when located out, have to be corrected. However, corrections in the books of accounts should he done by passing proper rectifying entries and not by culling or erasing figures. Such entries, as explained earlier, are passed in the General Journal or Journal Proper. The passing of proper rectifying entries is being explained below with suitable examples.
Example 1, The Sales Book overcast by Ps 50.
Over-casting of Sales Book will result in over-credit to Sales Account by Ps 50 since the total of the Sales Book is posted to the credit of the Sales Account at the end of a period. There can be two situation in such a case:
(i) The error might have been located out by the accountant before transferring the difference to the Suspense Account In such a case, there is mistake only in one account, i.e., the Sales Account. It has been credited more by Ps 50. The error can be rectified if the Sales Account is debited by Ps 50. Thus, the following will be the rectifying entry in the Journal Propet
No account is to be credited since the error affects only one account.
(ii) The error might have been located out by the accountant after transferring the difference in the Trial Balance to a Suspense Account In such a case two accounts are involved: (a) Sales Account, and (b) Suspense Account. Since Sales Account had been credited more by Ps 50 the credit side of the Thai Balance must have been more than the debit side of the Trial Balance. The Suspense Account should, therefore, have been put on the debit side of the Thai Balance in order to balance the two sides
The Sales Account has been &edited more by Ps 50. In order to rectify the error, the Sales Account should therefore be debited by Ps 50. Suspense Account has been debited because of this mistake which has now been found out. It should therefore, be closed by giving credit to it.