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ERRORS
Y Errors may be there in recording, classifying, and
summarising the financial transactions whether TB tallies or
not

Y Can be broadly classified into: Clerical errors and errors of

principle
Y 1. Clerical errors: Errors of omission, commission, and
compensating errors

Y Errors of omission: when a transaction is completely omitted

from the books of accounts
Y Errors of commission:errors on account of wrong balancing,
posting, carry forwards, totalling etc.
Y Errors of compensation: errors which compensate each other

Y 2. Errors of principle: when proper distinction between

revenue and capital items is not made. Eg. Sale of furniture ²
recorded in sales
ERRORS
Y Errors can be classified into two categories from the
point of view of locating them
Y 1. Errors which do not affect the agreement of the
Trial Balance : errors of omission, principle, and
compensating errors - difficult to locate
Y 2. Errors which affect the agreement of the Trial
Balance: errors of commission - can easily locate
ERRORS

Y 6

  




   



 

  


  



    
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 ERRORS

Y Procedure to locate errors which affect the agreement of

the TB
Y 1. Difference of the two sides of TB should be found out,
the amount should be divided by 2. check the two sides of
TB to find out if there is an amount equal to that figure:
amount may be placed to wrong side
Y 2. If no mistake is found out by step1., divide the
difference by 9. if the figure is completely divisible, it can
be an error of transposition of figures. Eg. 698 written as
896
Y 3. If the difference is a round figure, there is possibility of
wrong casting or wrong carry forwards of totals of a
subsidiary book or there is an error in balancing the
accounts
ERRORS
Y 4. If difference is not a round figure there is possibility
of error being committed in posting
Y 5. check whether the cash and bank account balances
are taken in the TB or not
Y 6. Schedules of Sundry debtors and creditors needs to
be checked to find out whether all balances of debtors
and creditors have been included in the schedules
Y 7. totals of subsidiary books (sales book, purchase
book«) should be checked to see whether postings
from these books are correctly made to the concerned
account
Y 8.check the books of original entry and their posting
and balancing
 SUSPENSE ACCOUNT
If the difference cannot be located even after the above
mentioned procedures, we can transfer the difference to an
account called Suspense Account

An adjustment account to which we transfer the

difference between debit and credit side of the trial
balance r
 



Y If debit side is short ² suspense account will be debited

as ¶To Difference in TB·

Y If Credit side is short ² suspense account will be

credited as ¶By Difference in TB·
RECTIFYING ACCOUNTING ENTRIES
Y Rectifying entries are passed in General Journal or
Journal Proper
Y m


Y Find out the accounts affected by the error

Y Find out what should have been and what has been
done
Y Credit or debit the respective account in order to set
the matters right
Y Put the difference to Suspense account
m

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Y P&L Adjustment account is debited or credited

while passing the rectifying accounting entries in
place of those accounts which relate to trading
and Profit and Loss account
m

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Y In this case, balance of suspense Account and

P&L Adjustment account opened for rectification
is transferred to the Capital Account