How are entries rectified after preparing the final balance?

Banking & FinanceFinance ManagementGrowth & Empowerment

There are two types of error rectifications while preparing the final balance. These are single side error and double side error respectively.

  • Single side error

Nominal accounts are preplaced by P&L (Profit & Loss) adjustment accounts.

Example − Discount allowed of Rs.750 is not posted to a discount account.

After trial balance, the error rectification is as follows −

Particulars
Debit
Credit
Discount allowed A/c
    To suspense A/c
750

750

After final account, the error rectification is as follows −

Particulars
Debit
Credit
P&L adjustment A/c
    To suspense A/c
750

750
  • Double side error

Wrong entries are identified and rectification is made by making the appropriate entries.Nominal accounts are replaced by P&L adjustment accounts.

Suspense accounts, real and personal accounts will carry forward to next year.

Example − Purchase account is wrongly debited for Rs.15000 for purchase of a plant.

Correction

After trial balance, the error rectification is as follows −

Particulars
Debit
Credit
Plant A/c
    To purchase A/c
15000

15000

After final balance, the error rectification is as follows −

Particulars
Debit
Credit
P&L Adjustment A/c
     To suspense A/c
15000

15000
raja
Published on 12-Jul-2021 12:01:14
Advertisements