Methods of Locating and Rectifying Errors

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Overview

Once an error is located, it should be properly corrected. The correction of accounting errors in a systematic manner is called the rectification of errors. This note has information about various methods of locating and rectifying errors.
Methods of Locating and Rectifying Errors
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Methods of locating errors

If any errors exit in the books, it affects the accuracy of results of business operations revealed by the financial statements. Therefore, the error must be located for its rectification. The task of locating errors is, however, not easy. The location of errors will be easier if the following steps are systematically taken:

  • Check the total of the trial balance
  • Compare the ledger account balances carried to the trial balance
  • Check the total of debtors’ and creditors’ accounts and compare with the balance of debtors’ a creditors’ amounts shown in the trial balance
  • Verify the total of subsidiary books and their posting into ledgers
  • Compare the items of trial balance of the current year with the items of the trial balance of the previous year to see if any balancing figure is omitted
  • Verify that all journal entries are posted into ledgers

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Rectification of errors

Once an error is located, it should be properly corrected. The correction of accounting errors in a systematic manner is called the rectification of errors. In other words, the process of systematically correcting the accounting errors is known as rectification of errors. The presence of accounting errors affects the accuracy of the profit or loss and the financial position of the business shown by the final accounts, therefore, no error should be left uncorrected.

Methods of rectification of errors

The following methods should be followed to rectify the accounting errors:

  1. Rectification of errors located before preparation of the trial balance
    Errors may be detected in that process of closing books and accounts of the preparation of trial balance. The errors detected in that process may be either one-sided errors or two-sided errors. However, once such errors are located they must be rectified immediately.

  2. Rectification of one-sided errors located before the preparation of trial balance
    One-sided errors are those errors which affect only one side of an account. Wrong totaling of subsidiary books, posting a wrong amount, posting on the wrong side are some of the examples of one-sided errors. Since two accounts are not involved in these errors, the journal entry cannot be passed for rectifying such errors. The one-sided error is rectified by making an additional posting affected the side of the ledger account.

  3. Rectification of two-sided errors located before the preparation of trial balance
    The errors that affect two or more accounts are called two-sided errors. Correction o such two-sided errors need to make the rectification of journal entries since such errors involve two or more accounts. Therefore, one account is debited and another account is credited to rectify two-sided errors. The rules of debit and credit are applied to rectify these errors. The following three steps are taken to rectify the two-sided errors:
    • Identify correct entry
    • Rewrite wrong entry
    • Find rectifying entry by making adjustment of correct entry and wrong entry

  4. Rectification of errors after preparation of trial balance
    Sometimes, errors may be detected after an accounting year is over. Those are the errors detected after the preparation of trial balance. The errors detected after the completion of accounting year may be one-sided and two-sided errors. Rectification of the errors seen after the preparation of trial balance can be made by preparing rectifying journal entries in the subsequent year only. Double entry principle is followed to rectify the errors detected after the preparation of trial balance. Two accounts are affected by the two-sided errors. Therefore, one account is debited and another account is credited for such errors. But, one-sided errors are rectified by opening ‘Suspense account’.
Things to remember
  • The correction of accounting errors in a systematic manner is called the rectification of errors. 
  • Errors may be detected in that process of closing books and accounts of the preparation of trial balance.
  • The errors that affect two or more accounts are called two-sided errors.
  • Wrong totaling of subsidiary books, posting a wrong amount, posting on the wrong side are some of the examples of one sided errors. 
  • Double entry principle is followed to rectify the errors detected after the preparation of trial balance. 
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
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Accounting Error Correction
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Questions and Answers

While examining the book of accounts for locating the errors, it would be better to follow some steps one after another serially to make the re-examination work easier and quicker. For this reason, the following steps should be followed for locating the errors: -

  1. Check whether the total of the trial balance has been obtained correctly or not.
  2. Check whether the balances of the ledger accounts have been extracted in the trial balance correctly or not.
  3. Check whether the balances of assets, liabilities and capital have been brought down in the new books correctly or not.
  4. Check whether the balances of the ledger accounts have been obtained correctly or not.
  5. Check the total of the subsidiary books.
  6. Compare the items of the trial balance of current year with that of previous year.
  7. Verify the posting and journalizing.

Adjustment and closing of the trial balance is an artificial process of closing. It is the process of determining the difference amount of the trial balance and making it equal by inserting the suspense account.

The suspense account is the temporary means for making the trial balance equal. It helps to adjust the difference amount and close the trial balance. It gives the way for preparing the final accounts in time.
The suspense account is newly opened account with the difference amount of the trial balance.

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