LOCATION OF ERRORS

 9.3 LOCATION OF ERRORS

You have learnt the types of errors which are usually committed in the process of accounting. These errors must be located and rectified before preparing the final accounts. You know that some of the errors affect the agreement of the Trial Balance , while some do not.'The errors such as errors of principle, errors of complete omission and errors of compensating nature which do not affect the Trial Balance are difficult to locate. They are usually found out during the course of audit or when the statement of accounts is received by the business or sent to customers for confirmation. However, the LOCATION  of errors of omission and comnlission which affect the Trial Balance is not so difficult. The following routine procedure is usually adopted for locating such errors. 

a) Check the totals of both the debit and the credit columns of the Trial Balance.

b) If the difference still persists, ascertain the exact amount of difference; and then.

i) see wheiher an account having that balance has been omitted from the Trial Balance. Suppose the debit column in Trial Balance is short by Rs. 630, it is just possible that an account with a debit balance of Rs. 030 has not &en entered in the Trial Balance 

ii) check whether an account with a balance equal to that difference has been entered twice in the Trial Balance.

iii) take half the amount of difference, see whether there is any account with such balance in the Trial Balance, and if so, check whether it is entered in the correct column or not. If an account with a debit balance of Rs. 315 has been entered in the credit column, the debit column becbmes short by Rs. 630.

c) Verify whether 

(i) the balances of all the accounts are included in the Trial Balance 

(ii) they are entered in the correct column, and 

(iii) their amounts have been correctly written. 

If no errors are found upto this stage, or the errors located liave been duly corrected, but still the Trial Balance does not tally, there is need to take further action. Yau may take the following steps: 

d) Check the totals of the lists of sundry debtors and sundry creditors.

e) Check the tota!s andbalances of all accounts in the ledger.

f) Check the totals and the postings of all subsidiary books.

g) Check the postings of all amounts equal to the difference in the trial balance. It is possible that a posting has been omitted. Similarly, check the postings of all d: amounts equal to half the difference. It is possible that the amount has been posted on the wrong side of the concerned account.

h) See that correct amounts have been brought forward from the previous pages.   

i) Verify that all opening balances have been correctly entered in various accounts.

j) Cornpare,the current year's Trial Balance with that of the previous year. Any variationeoticed should be carefully checked. 

The procedure outlined above, if carefully followed, should normally reveal all this errors. The errors are then rectified and n revised Txial Balance is prepared. If no other errors exist, the revised Trial Balance is likely to tally.

9.4 RECTEICATIBN OF ERRORS

Any error when located must be rectified. The rcetiffcaition should not be made by overwriting or by striking off the wrong entry. This would destroy the authenticity of the books of account. Hence, the errors should always be corrected by making suitable entries called rectifying entries. For purposes of rectification the errors are divided into two categories: (i) one-sided errors, and (ii) two-sided errors.

One-sided Errors: Certain errors affect only one side bf an account, either the debt side or the credit side. Such errors are called 'ope-sided errors'. Examples of one-sided errors are:

i) Rs. 100 received from Deshmukh was posted to his account as Rs. 10. It means Deshmukh's Account has been credited with Rs. 10 instead of Rs. 180 and there is no mistake in the Cash Book. Thus, this error has affected only one-side of an account.

ii) The Furchases Book is overcast by Rs. 1,000. This will affect thc debit side of Purchases Account where the total of the Purchases Book is posted, and no other account is affected. 

Two-sided Errors: Certain errors may affect two or more accounts. Such errors are called 'two-sided errors'. Examples of two-sided errors are:

i) A credit sale of Rs. 1,080 to Anand was wrongly recorded in the Sales Book as Rs. 1,8W. This error will affect two accounts. viz., Anand's Account and Sales Account. Anand's Account has been debited by Rs. 1,800 instead of Rs. 1,080. The Sales Account has also been credited by an additional amount of Rs. 720 (Rs. 1,800-1,080) because the Sales Book will show a higher total. 

ii) A sale of Rs. 500 made to Kamal has been posted on the debit side of Kishore's Account. This error will affect two accbunts viz., Kamal's Account and Kiskore's Account. An entry of Rs. 500 does not appear on the debit side of Kamal's Account whereas Kishore's Account has been wrongly debited with that amount.  

9.4.1 Rectification of one-sided Errors 

Generally errors are corrected by passing suitable journal entries. You know passing a journal bntry means debiting one account and crediting another. But in the case of one-sided error only one account is involved. So it cannot be corrected by passing the journal entry. It is rectified simply by noting the correction on the appropriate side. Take the first exhmple of one-sided error. Deshmukh's account was credited short by Rs. 90. This will be corrected by an additional entry for Rs. 90 on the credit side of his account as follows:

The wrong total in the Purchases Book will be circled with red ink and the correct total entered above or below the circle. The person doing the rectification will also put his initials.

9.4.2  Rectificarion of Two-sided Errors

You have e lemt that one-sided errors are corrected simply by noting the correction on the appropriate side of the account affected by the error. They cannot be rectifed by  suitable journal entries because only one account is involved. But, the two-sided errors are mostly rectified by journal entries. It is because such errors affect two or  more accounts and in most cases ihe debit and credit are equally affected. Take the case of first example of two-sided error given earlier. A credit sale of Rs. 1,080 to Anand was wrongly recorded in the Sales Book as Rs. 1,800. The two accounts affected are: (i) Anand's Account which shows an excess debit of Rs. 720 and (ii) Sales Account which stands credited in excess by Rs. 720. To rectify this error we must credit Anand's Account with Rs. 720 and debit the Sales Account with Rs. 720. So, a journalBentry can be passed as follows:

Take the second example of two-sided errors given earlier. A sale of Rs. 500 made to Kamal was posted to the debit side of Kishore's Account. The two accounts affected are: (i) Kamals Account which has not been debited by Rs. 500, and (ii) Kishore's Account which'has been wrongly debited with Rs. 500. To rectify this error we have to debit Kamal's Account with Rs. 500 and credit Kishore's Account with Rs. 508. So journal entry for the rectification of this error will be as follows: 

illustrations1

How would you rectify the following errors in the books of Kiran & Co?

How would you rectify the following errors in the books of Kiran & Co? 

1 The Sales Return Book has been undercast by Rs. 500. 

2 The total of the Bills Receivable Book amsulltirng Rs. 4,500 has been posted to the 

credit of Bills Receivable Account. 

3 While posting Purchases Book to the ledger the personal account of Kurnar has 

been credited with Rs. 221 instead of 33s. 212. 

4 Rs. 60,000 paid for the purchase of a TV set for the proprietor is debited to General y Expenses Account. 

5 An amount of Rs. 1,000 paid by Pran has been credited to the account of Praneet. 

6 Goods sold to Inder for Rs. 1,200 have been entered in the Purchases Book.