Ledger Accounts of Mr. Rawat

Rawat’s Capital Account

Dr.Cr.

Rohan’s Account

Dr.Cr.

Machinery Account

Dr.Cr.

Rahul’s Account

Dr.Cr.

Sales Account

Dr.Cr.

Cash Account

Dr.Cr.

Wages Account

Dr.Cr.

Depreciation Account

Dr.Cr.

Purchases Account

Dr.Cr.

(i) Trial Balance as at March 31, 2014 (Using Totals Method)

(ii) Trial Balance as at March 31, 2014 (Using Balances Method)

(iii) Trial Balance as at March 31, 2014 (Using Totals-cum-Balances Method)

Installation charges are a capital expenditure and should be debited to the Machinery Account. By debiting the Wages Account (a revenue expense), an error of principle was made.

Wrong Entry Passed

Correct Entry Should Be

To rectify, we must cancel the wrong debit to Wages A/c (by crediting it) and introduce the correct debit to Machinery A/c.

Since the transaction was never recorded, neither the Purchases account was debited nor was Raghu's account credited. The rectification is to simply record the correct entry that was missed.

Wrong Entry Passed (via Purchases Book)

Correct Entry Should Be (via Sales Book)

To rectify, we must:

1. Cancel the wrong debit to Purchases (by crediting it).
2. Cancel the wrong credit to Manav (by debiting it).
3. Introduce the correct debit to Manav.
4. Introduce the correct credit to Sales.

The first error gives an incorrect debit to Ram's A/c instead of a credit. The second error gives an incorrect debit to Ram's A/c instead of a debit to Shyam's A/c. Although the trial balance might agree due to other compensating factors, the individual accounts are wrong and need separate rectification.

Undercasting the Sales Return Book means the total posted to the debit of the Sales Return Account was short by ₹800. This makes the debit side of the trial balance short by ₹800. To rectify, we must debit the Sales Return Account with the shortfall of ₹800 and credit the Suspense Account.

The Cash account was correctly debited, but the corresponding credit to Ravish's account was missed. This leaves the credit side of the trial balance short by ₹4,000. To rectify, we must give the correct credit to Ravish's account and debit the Suspense Account.

Rohan's account should have been credited with ₹9,000. Instead, it was debited with ₹9,000. The effect of this error is ₹18,000 (₹9,000 to cancel the wrong debit + ₹9,000 to give the correct credit). The trial balance debit side is now heavier by ₹18,000. To rectify, we must credit Rohan's account with ₹18,000 and debit the Suspense Account.

Rectifying Journal Entries

Suspense Account

Suspense Account

Dr.Cr.

Since the Suspense Account is now balanced, it indicates that all one-sided errors that caused the initial difference have been located and rectified.

First, we need to identify the normal balance (Debit or Credit) for each account. The classification is as follows:

Based on the above classification, the Trial Balance is prepared as follows:

Trial Balance as at March 31, 2014

This is an error of Commission. Specifically, it is an error of recording in the wrong subsidiary book, which leads to incorrect posting to the respective ledger accounts.

State the wrong entry recorded in the book of accounts

Since the transaction was recorded in the Purchases Book, the incorrect entry passed in the ledger was:

Wrong Journal Entry

This entry has wrongly debited the Purchases Account and wrongly credited Rajni's Account.

Correct effect should have been

As it was a credit sale, the correct entry that should have been passed from the Sales Book is:

Correct Journal Entry

This means Rajni's Account should have been debited and the Sales Account should have been credited.

The rectification entry will be

Rectifying Journal Entry

Explanation of Rectification:

1. Rajni's A/c is debited with $\textsf{₹ } \ 10,000$: This is a combined effect. We need to debit Rajni's account to reverse the wrong credit of $\textsf{₹ } \ 5,000$, and then debit it again to post the correct debit of $\textsf{₹ } \ 5,000$. The total debit required is $(\textsf{₹ } \ 5,000 \text{ (to cancel credit)} + \textsf{₹ } \ 5,000 \text{ (for correct debit)}) = \textsf{₹ } \ 10,000$.

2. Purchases A/c is credited with $\textsf{₹ } \ 5,000$: This is done to cancel the original wrong debit to the Purchases Account.

3. Sales A/c is credited with $\textsf{₹ } \ 5,000$: This is done to record the correct credit to the Sales Account which was originally omitted.

This is an error of Principle. This error occurs when a transaction is recorded in contravention of accounting principles, such as treating a capital expenditure (purchase of an asset) as a revenue expenditure (purchase of goods).

State the wrong entry recorded in the book of accounts:

By entering the transaction into the Purchases Book, the following incorrect entry was passed:

Wrong Journal Entry

This has wrongly debited the Purchases Account. The credit to M/s Rao Furnishings is correct.

Correct effect should have been:

The purchase of furniture (an asset) should have been recorded through the Journal Proper as follows:

Correct Journal Entry

This means the Furniture A/c should have been debited.

The rectification entry will be:

Rectifying Journal Entry

Explanation of Rectification:

1. Furniture A/c is debited with $\textsf{₹ } \ 8,000$: To correctly record the purchase of the asset.

2. Purchases A/c is credited with $\textsf{₹ } \ 8,000$: To cancel the wrong debit that was originally posted to it.

This is an error of Commission (specifically, an error of recording in the wrong account).

State the wrong entry recorded in the book of accounts:

The transaction was incorrectly recorded in the cash book as:

Wrong Journal Entry

This has wrongly credited the Commission Received Account. The debit to the Cash Account is correct.

Correct effect should have been:

A cash sale should have been correctly recorded as:

Correct Journal Entry

This means the Sales A/c should have been credited.

The rectification entry will be:

Rectifying Journal Entry

Explanation of Rectification:

1. Commission Received A/c is debited with $\textsf{₹ } \ 15,000$: To cancel the wrong credit posted to it.

2. Sales A/c is credited with $\textsf{₹ } \ 15,000$: To give the correct credit which was originally omitted.

This is an error of Commission (specifically, an error of posting to the wrong person's account).

State the wrong entry recorded in the book of accounts:

The entry passed was:

Wrong Journal Entry

This has wrongly credited Nadeem's Account. The debit to the Cash Account is correct.

Correct effect should have been:

Cash received from Karim should have been recorded as:

Correct Journal Entry

This means Karim's A/c should have been credited.

The rectification entry will be:

Rectifying Journal Entry

Explanation of Rectification:

1. Nadeem's A/c is debited with $\textsf{₹ } \ 6,000$: To cancel the wrong credit posted to his account.

2. Karim's A/c is credited with $\textsf{₹ } \ 6,000$: To give the correct credit which was originally omitted from his account.

This is an error of Commission (posting with a wrong amount).

The wrong effect has been:

Mohan's account has been debited with $\textsf{₹ } \ 12,000$. This is an excess debit of $\textsf{₹ } \ 2,000$.

The correct effect should have been:

Mohan's account should have been debited with $\textsf{₹ } \ 10,000$.

The rectification entry will be:

To rectify the error, the excess debit of $\textsf{₹ } \ 2,000$ in Mohan's account must be cancelled by crediting his account. As this is a one-sided error, the Suspense Account will be debited.

Journal Entries

This is an error of Partial Omission.

The wrong effect has been:

The debit side of Neha's account has been omitted from posting. Her account has not been debited at all.

The correct effect should have been:

Neha's account should have been debited with $\textsf{₹ } \ 2,000$.

The rectification entry will be:

To rectify the error, Neha's account must now be debited. As this is a one-sided error, the Suspense Account will be credited to complete the double entry.

Journal Entries

This is an error of Commission (posting with a wrong amount).

The wrong effect has been:

Megha's account has been credited with only $\textsf{₹ } \ 1,000$. This is a short credit of $\textsf{₹ } \ 600$.

The correct effect should have been:

Megha's account should have been credited with $\textsf{₹ } \ 1,600$.

The rectification entry will be:

To rectify the error, Megha's account needs to be credited with the short amount of $\textsf{₹ } \ 600$. The Suspense Account will be debited to complete the double entry.

Journal Entries

This is an error of Partial Omission.

The wrong effect has been:

The Depreciation account has not been debited. The credit to the Furniture account is assumed to be correct.

The correct effect should have been:

The Depreciation account should have been debited with $\textsf{₹ } \ 1,500$.

The rectification entry:

To rectify the error, the Depreciation account must be debited. The Suspense Account will be credited to complete the double entry.

Journal Entries

(c) Both (a) and (b).

Corrected Explanation: While it is technically true that only one-sided errors will cause the trial balance totals to disagree arithmetically, the overall "agreement" and reliability of the trial balance as a proof of accuracy is affected by both types of errors.

• One-sided errors affect the agreement by causing the debit and credit totals to be unequal. The trial balance will not tally, directly revealing a problem with arithmetical accuracy.

• Two-sided errors (like errors of principle, complete omission, or compensating errors) also affect the agreement, but in a more deceptive way. They do not cause the totals to disagree, thereby creating a false sense of accuracy. The trial balance "agrees" in total, but it is not a correct representation of the financial position because hidden errors exist.

Therefore, in a broader sense, since both types of errors impact the validity and purpose of the trial balance's agreement, it can be considered to be affected by both.

(c) Cash received from Manoj posted to Saroj.

Explanation: An error of principle is a violation of a fundamental accounting principle, typically confusing a capital item with a revenue item. Options (a), (b), and (d) are all errors of principle. Option (c) is an error of commission, which is a clerical error of posting to the wrong person's account, but the correct type of account (a personal account) was used, so no accounting principle was violated.

(d) Cash sales not recorded in cash book.

Explanation: Errors of commission are clerical errors made during recording, posting, casting, or balancing. Options (a), (b), and (c) are all examples of such clerical mistakes. Option (d), not recording a transaction at all, is an error of complete omission, which is a different category of error.

(a) Sales return book undercast by ₹ 1,000.

Explanation: A suspense account is used to rectify one-sided errors. Undercasting the sales return book is a one-sided error because it affects only the total that is posted to the debit of the Sales Return account. The other options (b, c, and d) are all two-sided errors where the debit and credit aspects of the original wrong entry were equal, and their rectification will also have equal debits and credits without needing a suspense account.

(b) There may be two sided errors in the book.

Explanation: The agreement of a trial balance only confirms arithmetical accuracy; it does not guarantee that the books are completely error-free. Two-sided errors, such as errors of principle, compensating errors, or errors of complete omission, do not disturb the equality of debits and credits, so the trial balance would still agree even if they exist.

(a) There are some one sided errors only in the books yet to be located.

Explanation: A suspense account is created specifically to handle the difference caused by one-sided errors. Once all one-sided errors have been found and rectified, the suspense account's balance should become zero. If a balance still remains, it signifies that there are still undiscovered one-sided errors.

(b) An error of principle.

Explanation: Costs incurred to make a new asset ready for use (like installation wages) are capital expenditures and should be debited to the asset account (Machinery A/c). Debiting them to the Wages Account (a revenue expense) is a violation of the fundamental principle of distinguishing between capital and revenue expenditure. This is a classic example of an error of principle.

(b) A statement.

Explanation: A trial balance is not an account in the ledger; it is a statement or a list of all ledger account balances prepared at a specific point in time. Its purpose is to verify the arithmetical accuracy of the postings from the journal to the ledger.

(d) After posting to ledger is complete and accounts have been balanced.

Explanation: A trial balance is a list of account balances. Therefore, before it can be prepared, all transactions must be posted from the journal to the ledger, and then each ledger account must be totaled and balanced to find its closing balance. These closing balances are then listed in the trial balance.

A Trial Balance is a statement, not an account, prepared at the end of an accounting period. It lists the closing balances of all the accounts from the ledger. The statement has two columns: one for debit balances and one for credit balances.

Its primary objective is to verify the arithmetical accuracy of the postings made from the journal to the ledger. According to the principles of the double-entry system, the total of all debit balances must be equal to the total of all credit balances. If the totals of the trial balance agree, it is assumed that the posting and balancing of ledger accounts are arithmetically correct.

An error of principle occurs when a transaction is recorded in a way that violates a fundamental accounting principle, most commonly by incorrectly distinguishing between capital and revenue items. These errors do not affect the agreement of the trial balance.

Two examples are:

1. Wages paid for the installation of new machinery debited to the Wages Account: Installation charges are a capital expenditure and should be added to the cost of the machinery (debited to Machinery A/c). Treating it as a revenue expense (debiting Wages A/c) is an error of principle.

2. Sale of old furniture credited to the Sales Account: The sale of a fixed asset should be credited to the respective asset account (Furniture A/c) to reduce its book value. Crediting it to the Sales Account, which is meant for the sale of goods, is an error of principle.

An error of commission is a clerical error made during the process of recording, posting, or balancing the accounts. These errors may or may not affect the agreement of the trial balance, depending on their nature.

Two examples are:

1. Posting to the wrong account but on the correct side: Credit sales of $\textsf{₹ } \ 5,000$ to Suresh were correctly recorded in the Sales Book but were wrongly posted to the debit of Rakesh's account instead of Suresh's account. The trial balance will still agree as the debit is posted to a debtor's account.

2. Error in Casting (Totaling): The total of the Purchases Book was overcast (totaled more) by $\textsf{₹ } \ 1,000$. This is a one-sided error that will cause the debit side of the trial balance to be higher by $\textsf{₹ } \ 1,000$, and the trial balance will not agree.

There are three methods of preparing a trial balance:

1. Balances Method: This is the most common and widely used method. In this method, only the closing balance (debit or credit) of each ledger account is listed in the respective columns of the trial balance. The totals of the debit and credit columns must match.

2. Totals Method: In this method, the total of the debit side and the total of the credit side of every ledger account are listed in the debit and credit columns of the trial balance, respectively. The final totals of both columns of the trial balance must agree. This method is not commonly used.

3. Totals-cum-Balances Method: This is a combination of the above two methods. It contains four amount columns: two for the totals of debit and credit sides of ledger accounts and two for the final debit or credit balances of those accounts. It is the most detailed but is rarely used in practice due to its complexity.

When a trial balance does not agree, an accountant takes the following systematic steps to locate the error(s):

1. Re-total the Trial Balance: The first step is to re-check the addition of both the debit and credit columns of the trial balance.

2. Check for Specific Amount Errors: Halve the difference between the two sides. Look for a transaction of this exact amount that may have been posted to the wrong side of a ledger account.

3. Check for Transposition/Slide Errors: If the difference is perfectly divisible by 9, it may be a transposition error (e.g., 72 written as 27) or a slide error (e.g., 500 written as 50.00).

4. Verify Ledger Balances: Check that all ledger account balances have been correctly listed in the trial balance and placed in the correct column (debit or credit).

5. Re-calculate Ledger Balances: Re-check the balancing of each ledger account to ensure the closing balances are calculated correctly.

6. Trace Postings: Verify the postings from the journal and subsidiary books to the ledger to ensure all entries have been posted with the correct amount, to the correct account, and on the correct side.

A Suspense Account is a temporary account opened in the ledger to artificially make the trial balance agree when its debit and credit totals do not match. The difference between the totals is placed in the suspense account. It is also used to complete the double entry for the rectification of one-sided errors.

Yes, it is necessary that a suspense account will balance off (i.e., its balance will become zero) after all one-sided errors have been located and rectified. The very purpose of the account is to hold the net effect of these errors, so once they are corrected, the account should close automatically.

If a balance still remains in the suspense account after rectification efforts, it implies that there are still some undiscovered one-sided errors in the books. If the final accounts must be prepared before these errors are found, the remaining balance in the suspense account is carried to the Balance Sheet. A debit balance in the suspense account is shown on the Assets side, and a credit balance is shown on the Liabilities side.

The agreement of a trial balance is a test of arithmetical accuracy. The errors that cause a difference are those that violate this arithmetic equality.

Errors that cause a difference in the Trial Balance (One-Sided Errors):

• Error of Casting: Wrong totaling of a subsidiary book or a ledger account.
• Error of Posting to the Wrong Side: Posting a debit item to the credit side of an account, or vice-versa.
• Posting a Wrong Amount: Posting an incorrect amount to one of the accounts in a journal entry.
• Partial Omission of Posting: Posting only one aspect (debit or credit) of a journal entry to the ledger.

Errors that would not be revealed by a Trial Balance (Two-Sided Errors):

• Error of Principle: E.g., treating a capital expenditure like the purchase of furniture as a revenue expense by debiting the Purchases account.
• Error of Complete Omission: E.g., failing to record a credit sale transaction in the books entirely.
• Compensating Errors: E.g., an over-debit of $\textsf{₹ } \ 100$ in Ram's account is nullified by an under-debit of $\textsf{₹ } \ 100$ in Shyam's account.
• Posting to the Wrong Account: E.g., posting a correct debit amount to Rakesh's account instead of Mukesh's account.

While a trial balance is a useful tool, it has significant limitations as it is not conclusive proof of the complete accuracy of the accounting records. The main limitations are:

1. It Does Not Detect All Errors: The agreement of a trial balance only confirms that the total debits equal the total credits. It cannot detect two-sided errors that do not disturb this equality.
2. Errors of Principle Go Undetected: If a capital expenditure is wrongly treated as a revenue expenditure, the trial balance will still agree.
3. Errors of Complete Omission Go Undetected: If a transaction is not recorded in the journal at all, both its debit and credit aspects are omitted, and the trial balance will still agree.
4. Compensating Errors Go Undetected: If one error is nullified by the effect of another error (e.g., an over-debit is cancelled by an under-debit), the trial balance will agree.
5. Errors in the Wrong Account Go Undetected: If a correct amount is posted to the correct side but in the wrong account (e.g., debiting Ram instead of Shyam), the trial balance will not reveal this error.

Therefore, a 'tallying' trial balance only proves the arithmetical accuracy of the ledger postings and nothing more.

A Trial Balance is a statement prepared at the end of an accounting period by listing the closing balances of all ledger accounts. Its preparation serves several vital purposes in the accounting cycle, acting as a crucial link between the ledger and the final financial statements.

The main purposes are:

1. To Check Arithmetical Accuracy:
This is the primary objective. A trial balance verifies that for every debit entry made in the ledger, a corresponding credit entry of an equal amount exists. If the total of the debit column of the trial balance equals the total of the credit column, it is assumed that the posting and balancing of accounts are arithmetically correct.

2. To Serve as a Basis for Financial Statements:
The trial balance provides a consolidated summary of all ledger balances in one place. This summary becomes the direct source for preparing the final accounts. The balances of all nominal accounts (expenses, losses, incomes, gains) are transferred to the Trading and Profit and Loss Account, while the balances of all real and personal accounts (assets, liabilities, capital) are transferred to the Balance Sheet.

3. To Help in Locating Errors:
If the debit and credit totals of the trial balance do not match, it is a clear indication that one or more one-sided errors have been committed in the books. This prompts the accountant to undertake a systematic check of the records to locate and rectify these errors.

4. To Provide a Summary of Ledger Accounts:
It presents a complete list of all accounts and their final balances. This allows management to get a quick overview of the financial position of the business before the formal financial statements are prepared.

An Error of Principle is a fundamental error that arises when a business transaction is recorded in violation of basic accounting principles. The most common error of this type is the incorrect classification of expenditure or receipt between capital and revenue items. These errors do not affect the agreement of the trial balance because the amounts are correctly recorded on the correct side (debit/credit), but in the wrong class of account.

Example 1: Capital Expenditure Treated as Revenue Expenditure

Scenario: A sum of $\textsf{₹ } \ 10,000$ was paid for the installation of a new machine, but this amount was wrongly debited to the Carriage Account.

Analysis: The installation cost of a new asset is a capital expenditure and should be debited to the Machinery Account. By debiting the Carriage Account (a revenue expense), an accounting principle has been violated.

Rectification Entry:

Journal Entries

Example 2: Revenue Receipt Treated as Capital Receipt

Scenario: Sale of old newspapers for $\textsf{₹ } \ 500$ was credited to the Furniture Account.

Analysis: The sale of old newspapers is a miscellaneous income (revenue receipt) and should be credited to an income account like 'Miscellaneous Income A/c'. By crediting the Furniture Account (a capital/asset account), a principle has been violated.

Rectification Entry:

Journal Entries

Errors of Commission are clerical errors that are committed during the accounting process of recording, posting, casting (totaling), or balancing of accounts. These errors are not related to the violation of principles but are due to negligence or mistakes in arithmetic or data entry. They can be one-sided or two-sided.

Example 1: Error of Posting to the Wrong Account (Two-Sided Error)

Scenario: Credit sales of $\textsf{₹ } \ 2,000$ to Ajay were wrongly posted to the debit of Vijay's account.

Analysis: The Sales account was correctly credited, but the debit was posted to the wrong personal account. Since a debit was made, the trial balance will agree. The error is that Vijay is wrongly debited and Ajay is wrongly omitted from being debited.

Rectification Entry:

Journal Entries

Example 2: Error of Casting (One-Sided Error)

Scenario: The total of the Purchases Book was undercast (totaled less) by $\textsf{₹ } \ 1,000$.

Analysis: The individual postings to creditors' accounts are correct. However, the total posted to the debit of the Purchases Account in the ledger is short by $\textsf{₹ } \ 1,000$. This is a one-sided error that will cause the trial balance debit side to be less by $\textsf{₹ } \ 1,000$.

Rectification Entry:

Journal Entries

The errors usually committed in recording business transactions can be broadly classified into four main categories:

1. Errors of Principle:
These errors occur when a transaction is recorded in contravention of fundamental accounting principles. This usually involves treating a revenue item as a capital item, or vice-versa. For example, debiting the Repairs account for the cost of building an extension to the factory. These errors do not affect the trial balance.

2. Errors of Omission:
These errors occur when a transaction is either completely or partially omitted from being recorded in the books.

• Complete Omission: The transaction is not recorded in the journal at all. E.g., a credit sale is completely forgotten. This does not affect the trial balance.
• Partial Omission: One aspect of a transaction is recorded, but the other is not. E.g., cash received from a customer is recorded in the cash book but not posted to the customer's account. This affects the trial balance.

3. Errors of Commission:
These are clerical errors that arise due to negligence or mistake during the accounting process. Examples include:

• Error of recording in the wrong subsidiary book.
• Error of posting to the wrong account, on the wrong side, or with the wrong amount.
• Error of casting (wrong totaling) of a subsidiary book or ledger account.
• Error of carrying forward a balance incorrectly.

4. Compensating Errors:
These are a set of two or more errors where the net effect on the debits and credits is nullified. The effect of one error is cancelled out by the effect of another error. For example, the Purchases account was undercast by $\textsf{₹ } \ 500$ (less debit), and the Sales account was also undercast by $\textsf{₹ } \ 500$ (less credit). The trial balance will still agree despite these errors.

Analysis of the Error:
The transaction was a credit purchase of office equipment (pendrive) for $\textsf{₹ } \ 3,500$.
The correct posting should have been: Debit Office Equipment A/c $\textsf{₹ } \ 3,500$ and Credit Creditors A/c $\textsf{₹ } \ 3,500$.
The wrong posting made was: Debit Office Equipment A/c $\textsf{₹ } \ 3,500$ and Debit Creditors A/c $\textsf{₹ } \ 3,500$.

(a) Is the balance of the office equipment account overstated, understated, or correctly stated in the trial balance?
The Office Equipment account was correctly debited with $\textsf{₹ } \ 3,500$. Therefore, its balance of $\textsf{₹ } \ 15,600$ is correctly stated.

(b) Is the balance of the creditors account overstated, understated, or correctly stated in the trial balance?
The Creditors account (which should have a credit balance) should have been credited by $\textsf{₹ } \ 3,500$. Instead, it was debited by $\textsf{₹ } \ 3,500$. This means its balance is understated by $\textsf{₹ } \ 7,000$ (the missed credit of $\textsf{₹ } \ 3,500$ plus the wrong debit of $\textsf{₹ } \ 3,500$).

(c) Is the debit column total of the trial balance overstated, understated, or correctly stated?
The debit side correctly received a debit of $\textsf{₹ } \ 3,500$ for Office Equipment but also incorrectly received a debit of $\textsf{₹ } \ 3,500$ for Creditors. Therefore, the debit column total is overstated by $\textsf{₹ } \ 3,500$.

(d) Is the credit column total of the trial balance overstated, understated, or correctly stated?
The credit side should have received a credit of $\textsf{₹ } \ 3,500$ for the Creditors account, but it received nothing. Therefore, the credit column total is understated by $\textsf{₹ } \ 3,500$.

(e) If the debit column total of the trial balance is ₹ 2,40,000 before correcting the error, what is the total of credit column.
The debit total is overstated by $\textsf{₹ } \ 3,500$ and the credit total is understated by $\textsf{₹ } \ 3,500$. The total difference between the two columns is $\textsf{₹ } \ 3,500 + \textsf{₹ } \ 3,500 = \textsf{₹ } \ 7,000$.
Since the debit total is higher, the credit total will be: $$Credit \ Total = Debit \ Total - Difference$$ $$Credit \ Total = \textsf{₹ } \ 2,40,000 - \textsf{₹ } \ 7,000 = \textsf{₹ } \ 2,33,000.$$
The total of the credit column is $\textsf{₹ } \ 2,33,000$.

These are all examples of errors of complete omission. Since the transactions were never recorded in the original books (like the sales or purchases journal), they were never posted to the ledger. This means both the debit and credit aspects of each transaction were missed. Rectification simply involves passing the correct journal entry that was omitted in the first place.

Journal Entries

Explanation of Rectification Entries

(i) Credit sales to Mohan were not recorded:

• Effect of Transaction: A credit sale creates a debtor (an asset for the business) and generates sales revenue (an income). According to the rules of accounting, we must debit the receiver (Mohan) and credit the income (Sales).

• Rectification: Since the entry was completely missed, we simply record the original, correct journal entry: Mohan's A/c is debited (to show he owes us money) and Sales A/c is credited (to record the income).

(ii) Credit purchases from Rohan were not recorded:

• Effect of Transaction: A credit purchase creates an expense (Purchases) and a creditor (a liability for the business). We must debit the expense (Purchases) and credit the giver (Rohan).

• Rectification: We pass the omitted journal entry by debiting Purchases A/c (to record the expense) and crediting Rohan's A/c (to show we owe him money).

(iii) Goods returned to Rakesh were not recorded:

• Effect of Transaction: Returning goods to a supplier (a purchase return) reduces our liability to that supplier. The account of the supplier is debited to show this reduction. The Purchases Return account is credited.

• Rectification: The omitted entry is recorded by debiting Rakesh's A/c (to decrease the liability) and crediting Purchases Return A/c.

(iv) Goods returned from Mahesh were not recorded:

• Effect of Transaction: Goods returned by a customer (a sales return) reduce the amount owed by that customer (debtor). The customer's account is credited to show this reduction. The Sales Return account is debited.

• Rectification: The correct entry is passed by debiting Sales Return A/c and crediting Mahesh's A/c (to decrease the asset/debtor).

These are all examples of errors of commission, specifically errors of recording with an incorrect amount. In each case, the correct accounts were debited and credited, but for a lesser amount. The rectification involves passing the original journal entry again, but only for the difference (the amount that was short-recorded).

Journal Entries

Explanation of Rectification Entries

(i) Credit sales to Mohan were undercast:

• Error: The transaction was recorded as $\textsf{₹ }$ 700 instead of $\textsf{₹ }$ 7,000. Both Mohan's A/c and Sales A/c were recorded short by $\textsf{₹ } \ (7,000 - 700) = \textsf{₹ } \ 6,300$.

• Rectification: To correct this, we simply pass the same entry (debit Mohan, credit Sales) for the amount of the difference, which is $\textsf{₹ }$ 6,300.

(ii) Credit purchases from Rohan were undercast:

• Error: The purchase was recorded as $\textsf{₹ }$ 900 instead of $\textsf{₹ }$ 9,000. Both Purchases A/c and Rohan's A/c were short-recorded by $\textsf{₹ } \ (9,000 - 900) = \textsf{₹ } \ 8,100$.

• Rectification: We debit Purchases A/c and credit Rohan's A/c with the difference of $\textsf{₹ }$ 8,100 to bring the balances to the correct amount.

(iii) Goods returned to Rakesh were undercast:

• Error: The purchase return was recorded as $\textsf{₹ }$ 400 instead of $\textsf{₹ }$ 4,000. Rakesh's A/c was short-debited and Purchases Return A/c was short-credited by $\textsf{₹ } \ (4,000 - 400) = \textsf{₹ } \ 3,600$.

• Rectification: The original entry (debit Rakesh, credit Purchases Return) is passed again for the difference of $\textsf{₹ }$ 3,600.

(iv) Goods returned from Mahesh were undercast:

• Error: The sales return was recorded as $\textsf{₹ }$ 100 instead of $\textsf{₹ }$ 1,000. Sales Return A/c was short-debited and Mahesh's A/c was short-credited by $\textsf{₹ } \ (1,000 - 100) = \textsf{₹ } \ 900$.

• Rectification: We debit Sales Return A/c and credit Mahesh's A/c with the difference of $\textsf{₹ }$ 900 to complete the recording.

These are all examples of errors of commission, where the original entry was correctly recorded in the right accounts but with a higher amount (overcast). The rectification requires passing a reverse entry for the excess amount that was recorded to nullify the effect of the overstatement.

Journal Entries

Explanation of Rectification Entries

(i) Credit sales to Mohan were overcast:

• Error: The sale was recorded as $\textsf{₹ }$ 7,200 instead of $\textsf{₹ }$ 7,000. Mohan's A/c was excessively debited and Sales A/c was excessively credited by $\textsf{₹ } \ (7,200 - 7,000) = \textsf{₹ } \ 200$.

• Rectification: To correct this, we reverse the original entry for the excess amount by debiting Sales A/c (to reduce income) and crediting Mohan's A/c (to reduce the amount he owes).

(ii) Credit purchases from Rohan were overcast:

• Error: The purchase was recorded as $\textsf{₹ }$ 9,900 instead of $\textsf{₹ }$ 9,000. Purchases A/c was over-debited and Rohan's A/c was over-credited by $\textsf{₹ } \ (9,900 - 9,000) = \textsf{₹ } \ 900$.

• Rectification: We reverse the effect by debiting Rohan's A/c (to reduce our liability) and crediting Purchases A/c (to reduce the expense).

(iii) Goods returned to Rakesh were overcast:

• Error: The purchase return was recorded as $\textsf{₹ }$ 4,040 instead of $\textsf{₹ }$ 4,000. Rakesh's A/c was over-debited and Purchases Return A/c was over-credited by $\textsf{₹ } \ (4,040 - 4,000) = \textsf{₹ } \ 40$.

• Rectification: The original entry (Dr. Rakesh, Cr. Purchases Return) is reversed for the excess amount. We debit Purchases Return A/c and credit Rakesh's A/c with $\textsf{₹ }$ 40.

(iv) Goods returned from Mahesh were overcast:

• Error: The sales return was recorded as $\textsf{₹ }$ 1,600 instead of $\textsf{₹ }$ 1,000. Sales Return A/c was over-debited and Mahesh's A/c was over-credited by $\textsf{₹ } \ (1,600 - 1,000) = \textsf{₹ } \ 600$.

• Rectification: To correct this, we reverse the entry for the excess amount by debiting Mahesh's A/c and crediting Sales Return A/c with $\textsf{₹ }$ 600.

Journal Entries

Explanation of Rectification Entries

(a) Salary paid wrongly debited to employee’s personal account:

• Error: The expense was wrongly debited to Employee's Personal A/c instead of Salary A/c. This is an error of principle.

• Rectification: Debit the correct expense account (Salary A/c) and credit the wrongly debited account (Employee's Personal A/c) to cancel the error.

(b) Rent paid wrongly posted to landlord’s personal account:

• Error: The expense was incorrectly debited to Landlord's Personal A/c instead of Rent A/c. This is an error of principle.

• Rectification: Debit the correct expense account (Rent A/c) and credit the wrongly debited account (Landlord's Personal A/c) to reverse the error.

(c) Goods withdrawn by proprietor wrongly debited to sundry expenses:

• Error: Goods withdrawn for personal use (Drawings) were mistakenly debited to Sundry Expenses A/c. This is an error of principle.

• Rectification: Debit the correct account (Drawings A/c) and credit the wrongly debited account (Sundry Expenses A/c) to correct the mistake.

(d) Cash received from Kohli wrongly posted to Kapur’s account:

• Error: The credit for cash received was given to Kapur instead of Kohli. This is an error of commission.

• Rectification: Debit Kapur's A/c to cancel the wrong credit. Credit Kohli's A/c to give the correct credit.

(e) Cash paid to Babu wrongly posted to Sabu’s account:

• Error: The debit for cash paid was given to Sabu instead of Babu. This is an error of commission.

• Rectification: Debit the correct account (Babu's A/c) and credit the wrongly debited account (Sabu's A/c) to correct the posting.

These are all examples of errors of commission, specifically errors where transactions have been recorded in the wrong type of subsidiary book. This leads to incorrect debits and credits in the ledger accounts. The rectification process involves reversing the wrong entry and recording the correct entry.

(a) Credit Sales to Mohan ₹ 7,000 were recorded in purchases book.

Wrong Entry Recorded (from Purchases Book):

Correct Entry Required (for Sales Book):

Rectifying Journal Entry:

(b) Credit Purchases from Rohan ₹ 900 were recorded in sales book.

Wrong Entry Recorded (from Sales Book):

Correct Entry Required (for Purchases Book):

Rectifying Journal Entry:

(c) Goods returned to Rakesh ₹ 4,000 were recorded in the sales return book.

Wrong Entry Recorded (from Sales Return Book):

Correct Entry Required (for Purchases Return Book):

Rectifying Journal Entry:

(d) Goods returned from Mahesh ₹ 1,000 were recorded in purchases return book.

Wrong Entry Recorded (from Purchases Return Book):

Correct Entry Required (for Sales Return Book):

Rectifying Journal Entry:

(e) Goods returned from Nahesh ₹ 2,000 were recorded in purchases book.

Wrong Entry Recorded (from Purchases Book):

Correct Entry Required (for Sales Return Book):

Rectifying Journal Entry:

These errors are one-sided errors known as errors of casting (totalling). They occur when the total of a subsidiary book is calculated incorrectly. Because the total of a subsidiary book is posted to only one ledger account (e.g., the total of the Sales Book is credited to the Sales Account), an error in this total affects only one side of the trial balance, causing it to disagree. To rectify such one-sided errors, a temporary account called the Suspense Account is used to complete the double entry.

Journal Entries

Explanation of Rectification Entries

(a) Sales book overcast by ₹ 700:

• Effect of Error: The Sales Account has a normal credit balance. Overcasting means the total was calculated as ₹ 700 more than it should be, resulting in an excess credit in the Sales Account.

• Rectification: To cancel the excess credit, we must debit the Sales A/c by ₹ 700. The corresponding credit is given to the Suspense A/c.

(b) Purchases book overcast by ₹ 500:

• Effect of Error: The Purchases Account has a normal debit balance. Overcasting led to an excess debit of ₹ 500 in the Purchases Account.

• Rectification: To nullify the excess debit, we must credit the Purchases A/c by ₹ 500. The corresponding debit is given to the Suspense A/c.

(c) Sales return book overcast by ₹ 300:

• Effect of Error: The Sales Return Account has a normal debit balance. Overcasting resulted in an excess debit of ₹ 300 in the Sales Return Account.

• Rectification: To correct this, we must credit the Sales Return A/c by ₹ 300 to reduce its balance. The corresponding debit is placed in the Suspense A/c.

(d) Purchase return book overcast by ₹ 200:

• Effect of Error: The Purchases Return Account has a normal credit balance. Overcasting caused an excess credit of ₹ 200 in the Purchases Return Account.

• Rectification: To cancel the excess credit, we must debit the Purchases Return A/c by ₹ 200. The corresponding credit is given to the Suspense A/c to complete the double entry.

These errors are one-sided errors known as errors of casting (totalling). They occur when the total of a subsidiary book is calculated incorrectly (undercast means totalled short). Since the incorrect total affects only one side of the trial balance, it will not tally. To rectify such one-sided errors, a temporary account called the Suspense Account is used to complete the double entry for the rectification.

Journal Entries

Explanation of Rectification Entries

(a) Sales book undercast by ₹ 300:

• Effect of Error: The Sales Account has a normal credit balance. Undercasting means the total was calculated as $\textsf{₹ }$ 300 less than it should be, resulting in a short credit in the Sales Account.

• Rectification: To correct this, we need to give more credit to the Sales Account. Therefore, we credit the Sales A/c by $\textsf{₹ }$ 300. The corresponding debit is given to the Suspense A/c.

(b) Purchases book undercast by ₹ 400:

• Effect of Error: The Purchases Account has a normal debit balance. Undercasting led to a short debit of $\textsf{₹ }$ 400 in the Purchases Account.

• Rectification: To provide the missing debit, we must debit the Purchases A/c by $\textsf{₹ }$ 400. The corresponding credit is given to the Suspense A/c.

(c) Return Inwards book undercast by ₹ 200:

• Effect of Error: The Return Inwards (Sales Return) Account has a normal debit balance. Undercasting resulted in a short debit of $\textsf{₹ }$ 200 in the Sales Return Account.

• Rectification: To correct this, we must debit the Sales Return A/c by $\textsf{₹ }$ 200 to increase its balance. The corresponding credit is placed in the Suspense A/c.

(d) Return outwards book undercast by ₹ 100:

• Effect of Error: The Return Outwards (Purchases Return) Account has a normal credit balance. Undercasting caused a short credit of $\textsf{₹ }$ 100 in the Purchases Return Account.

• Rectification: To provide the missing credit, we must credit the Purchases Return A/c by $\textsf{₹ }$ 100. The corresponding debit is given to the Suspense A/c to complete the double entry.

These errors are all one-sided errors of posting. This means the entry was correctly made in the subsidiary book (e.g., Sales Book) and the total was correctly posted to the control account (e.g., Sales Account), but the corresponding posting to the personal account was omitted. Such errors cause the Trial Balance to disagree. To rectify them, we complete the missing posting and use a Suspense Account to complete the double entry for the rectification.

Rectifying Journal Entries

Suspense Account

Dr.Cr.

After posting all the rectification entries, the Suspense Account shows a balancing figure of $\textsf{₹ } \ 2,000$ on the debit side. This signifies that the Suspense Account must have had an opening credit balance of $\textsf{₹ } \ 2,000$. An opening credit balance in the Suspense Account indicates that the debit column of the original Trial Balance was shorter, or in other words, the credit column had an excess total.

Therefore, the difference in the Trial Balance was $\textsf{₹ } \ 2,000$ (Excess Credit).

These errors are one-sided errors of posting with incorrect amounts. The error lies only in the personal or nominal account, while the other side of the entry is assumed to be correct. This causes the Trial Balance to disagree. We will use a Suspense Account to rectify these errors.

Rectifying Journal Entries

Suspense Account

Dr.Cr.

The balancing figure of $\textsf{₹ } \ 5,800$ on the credit side of the Suspense Account represents the original difference in the Trial Balance. A credit balance in the Suspense Account means the debit side of the original Trial Balance was heavier.

Therefore, the difference in the Trial Balance was $\textsf{₹ } \ 5,800$ (Excess Debit).

These are all examples of errors of commission, where the transaction has been posted to the wrong account. Since a wrong account was debited or credited instead of the correct one, the trial balance would still agree arithmetically. The rectification involves transferring the amount from the incorrect account to the correct account.

Journal Entries

Explanation of Rectification Entries

(a) Credit sales to Mohan were posted to Karan:

• Error: The debit was incorrectly given to Karan's A/c instead of Mohan's A/c.

• Rectification: To correct this, we debit Mohan's A/c to correctly show him as a debtor and credit Karan's A/c to cancel the wrong debit.

(b) Credit purchases from Rohan were posted to Gobind:

• Error: The credit for the purchase was incorrectly given to Gobind's A/c instead of Rohan's A/c.

• Rectification: We debit Gobind's A/c to cancel the wrong credit and credit Rohan's A/c to correctly record the liability.

(c) Goods returned to Rakesh were posted to Naresh:

• Error: The debit for the purchase return was incorrectly given to Naresh's A/c instead of Rakesh's A/c.

• Rectification: We debit Rakesh's A/c to record the correct reduction in liability and credit Naresh's A/c to cancel the wrong debit.

(d) Goods returned from Mahesh were posted to Manish:

• Error: The credit for the sales return was incorrectly given to Manish's A/c instead of Mahesh's A/c.

• Rectification: We debit Manish's A/c to cancel the wrong credit and credit Mahesh's A/c to correctly record the reduction in his debt.

(e) Cash sales were posted to commission account:

• Error: The credit for the revenue was posted to Commission A/c instead of Sales A/c. The debit to Cash A/c was correct.

• Rectification: We debit Commission A/c to cancel the wrong credit and credit Sales A/c to record the income in the correct account.

These errors are all one-sided errors involving incorrect posting to ledger accounts. They affect the arithmetical agreement of the Trial Balance, necessitating the use of a Suspense Account for rectification. We will pass rectifying entries for each error and then prepare the Suspense Account to find the original difference in the Trial Balance.

Rectifying Journal Entries

Explanation of Rectification Entries

(a) Sales to Mohan posted to his credit:

• Correct Posting: Mohan's A/c should have been debited with $\textsf{₹ } \ 7,000$.

• Wrong Posting: Mohan's A/c was credited with $\textsf{₹ } \ 7,000$.

• Rectification: To cancel the wrong credit, we must debit Mohan's A/c with $\textsf{₹ } \ 7,000$. To post the correct debit, we must again debit Mohan's A/c with $\textsf{₹ } \ 7,000$. The total debit to Mohan's A/c is therefore $\textsf{₹ } \ 14,000$. The credit goes to Suspense A/c.

(b) Purchases from Rohan posted to his debit as ₹ 6,000:

• Correct Posting: Rohan's A/c should have been credited with $\textsf{₹ } \ 9,000$.

• Wrong Posting: Rohan's A/c was debited with $\textsf{₹ } \ 6,000$.

• Rectification: To cancel the wrong debit, we credit Rohan's A/c with $\textsf{₹ } \ 6,000$. To post the correct credit, we again credit Rohan's A/c with $\textsf{₹ } \ 9,000$. The total credit to Rohan's A/c is $\textsf{₹ } \ 15,000$. The debit goes to Suspense A/c.

(c) Goods returned to Rakesh posted to his credit:

• Correct Posting: For purchase returns, Rakesh's A/c should be debited with $\textsf{₹ } \ 4,000$.

• Wrong Posting: Rakesh's A/c was credited with $\textsf{₹ } \ 4,000$.

• Rectification: We need to debit Rakesh's A/c with $\textsf{₹ } \ 4,000$ to cancel the wrong credit and debit again with $\textsf{₹ } \ 4,000$ for the correct posting. Total debit required is $\textsf{₹ } \ 8,000$. The credit goes to Suspense A/c.

(d) Goods returned from Mahesh posted to his debit as ₹ 2,000:

• Correct Posting: For sales returns, Mahesh's A/c should be credited with $\textsf{₹ } \ 1,000$.

• Wrong Posting: Mahesh's A/c was debited with $\textsf{₹ } \ 2,000$.

• Rectification: To cancel the wrong debit, we credit Mahesh's A/c with $\textsf{₹ } \ 2,000$. To post the correct credit, we again credit Mahesh's A/c with $\textsf{₹ } \ 1,000$. The total credit required is $\textsf{₹ } \ 3,000$. The debit goes to Suspense A/c.

(e) Cash sales posted to the debit of sales account as ₹ 5,000:

• Correct Posting: The Sales A/c should be credited with $\textsf{₹ } \ 2,000$.

• Wrong Posting: The Sales A/c was debited with $\textsf{₹ } \ 5,000$.

• Rectification: To cancel the wrong debit, we credit Sales A/c with $\textsf{₹ } \ 5,000$. To post the correct credit, we again credit Sales A/c with $\textsf{₹ } \ 2,000$. The total credit required is $\textsf{₹ } \ 7,000$. The debit goes to Suspense A/c.

Suspense Account

Dr.Cr.

The balancing figure of $\textsf{₹ } \ 3,000$ on the credit side of the Suspense Account represents the original difference. An opening credit balance means the debit side of the original Trial Balance was heavier.

Therefore, the original difference in the Trial Balance was $\textsf{₹ } \ 3,000$ (Excess Debit).

These are complex, one-sided errors involving posting to the wrong account, on the wrong side, or with the wrong amount. Since these errors affect the arithmetical agreement of the Trial Balance, a Suspense Account is used for their rectification. The following entries correct each error and help ascertain the original difference in the trial balance.

Rectifying Journal Entries

Explanation of Rectification Entries

(a) Credit sales to Mohan ₹ 7,000 were posted to Karan as ₹ 5,000.

• Correct Posting: Mohan's A/c should have been debited with $\textsf{₹ } \ 7,000$.

• Wrong Posting: Karan's A/c was debited with $\textsf{₹ } \ 5,000$.

• Rectification: Debit Mohan's A/c with $\textsf{₹ } \ 7,000$ (the correct action). Credit Karan's A/c with $\textsf{₹ } \ 5,000$ to cancel the wrong debit. The difference ($\textsf{₹ } \ 7,000 \text{ Dr} - \textsf{₹ } \ 5,000 \text{ Cr} = \textsf{₹ } \ 2,000 \text{ Dr}$) has no corresponding credit, so Suspense A/c is credited with $\textsf{₹ } \ 2,000$.

(b) Credit purchases from Rohan ₹ 9,000 were posted to the debit of Gobind as ₹ 10,000.

• Correct Posting: Rohan's A/c should have been credited with $\textsf{₹ } \ 9,000$.

• Wrong Posting: Gobind's A/c was debited with $\textsf{₹ } \ 10,000$.

• Rectification: Credit Rohan's A/c with $\textsf{₹ } \ 9,000$ (the correct action). Credit Gobind's A/c with $\textsf{₹ } \ 10,000$ to cancel the wrong debit. The total credit is $\textsf{₹ } \ 19,000$, so Suspense A/c is debited for the full amount.

(c) Goods returned to Rakesh ₹ 4,000 were posted to the credit of Naresh as ₹ 3,000.

• Correct Posting: Rakesh's A/c should have been debited with $\textsf{₹ } \ 4,000$.

• Wrong Posting: Naresh's A/c was credited with $\textsf{₹ } \ 3,000$.

• Rectification: Debit Rakesh's A/c with $\textsf{₹ } \ 4,000$ (the correct action). Debit Naresh's A/c with $\textsf{₹ } \ 3,000$ to cancel the wrong credit. The total debit is $\textsf{₹ } \ 7,000$, so Suspense A/c is credited for the full amount.

(d) Goods returned from Mahesh ₹ 1,000 were posted to the debit of Manish as ₹ 2,000.

• Correct Posting: Mahesh's A/c should have been credited with $\textsf{₹ } \ 1,000$.

• Wrong Posting: Manish's A/c was debited with $\textsf{₹ } \ 2,000$.

• Rectification: Credit Mahesh's A/c with $\textsf{₹ } \ 1,000$ (the correct action). Credit Manish's A/c with $\textsf{₹ } \ 2,000$ to cancel the wrong debit. The total credit is $\textsf{₹ } \ 3,000$, so Suspense A/c is debited for the full amount.

(e) Cash sales ₹ 2,000 were posted to commission account as ₹ 200.

• Correct Posting: Sales A/c should have been credited with $\textsf{₹ } \ 2,000$.

• Wrong Posting: Commission A/c was credited with $\textsf{₹ } \ 200$.

• Rectification: Debit Commission A/c with $\textsf{₹ } \ 200$ to cancel the wrong credit. Credit Sales A/c with $\textsf{₹ } \ 2,000$ for the correct credit. The entry does not balance. The difference ($\textsf{₹ } \ 2,000 \text{ Cr} - \textsf{₹ } \ 200 \text{ Dr} = \textsf{₹ } \ 1,800 \text{ Cr}$) needs a corresponding debit, so Suspense A/c is debited with $\textsf{₹ } \ 1,800$.

Suspense Account

Dr.Cr.

The balancing figure of $\textsf{₹ } \ 14,800$ on the credit side of the Suspense Account represents the original difference. An opening credit balance means the debit side of the original Trial Balance was heavier.

Therefore, the original difference in the Trial Balance was $\textsf{₹ } \ 14,800$ (Excess Debit).

In each of these cases, the error is one-sided because the posting to the personal account (Mohan, Rohan, etc.) was done correctly, but the posting from the subsidiary book to the nominal account (Sales, Purchases, etc.) was incorrect. This would cause the trial balance to disagree, and therefore, a Suspense Account is used for rectification.

Rectifying Journal Entries

Explanation of Rectification Entries

(a) Sales to Mohan recorded in Purchases Book:

• Wrong Effect: Purchases A/c was debited by ₹ 7,000. Mohan was correctly debited.

• Required Effect: Sales A/c should have been credited by ₹ 7,000.

• Rectification: Credit Purchases A/c to cancel the wrong debit. Credit Sales A/c to give the correct credit. The total credit of ₹ 14,000 is balanced by debiting the Suspense A/c.

(b) Purchases from Rohan recorded in Sales Book:

• Wrong Effect: Sales A/c was credited by ₹ 9,000. Rohan was correctly credited.

• Required Effect: Purchases A/c should have been debited by ₹ 9,000.

• Rectification: Debit Sales A/c to cancel the wrong credit. Debit Purchases A/c to give the correct debit. The total debit of ₹ 18,000 is balanced by crediting the Suspense A/c.

(c) Purchase Return to Rakesh recorded in Sales Return Book:

• Wrong Effect: Sales Return A/c was debited by ₹ 4,000. Rakesh was correctly debited.

• Required Effect: Purchases Return A/c should have been credited by ₹ 4,000.

• Rectification: Credit Sales Return A/c to cancel the wrong debit. Credit Purchases Return A/c to give the correct credit. The total credit of ₹ 8,000 is balanced by debiting the Suspense A/c.

(d) Sales Return from Mahesh recorded in Purchases Return Book:

• Wrong Effect: Purchases Return A/c was credited by ₹ 1,000. Mahesh was correctly credited.

• Required Effect: Sales Return A/c should have been debited by ₹ 1,000.

• Rectification: Debit Purchases Return A/c to cancel the wrong credit. Debit Sales Return A/c to give the correct debit. The total debit of ₹ 2,000 is balanced by crediting the Suspense A/c.

(e) Purchase Return to Naresh recorded in Purchases Book:

• Wrong Effect: Purchases A/c was debited by ₹ 2,000. Naresh was correctly debited.

• Required Effect: Purchases Return A/c should have been credited by ₹ 2,000.

• Rectification: Credit Purchases A/c to cancel the wrong debit. Credit Purchases Return A/c to give the correct credit. The total credit of ₹ 4,000 is balanced by debiting the Suspense A/c.

Suspense Account

Dr.Cr.

The balancing figure of $\textsf{₹ } \ 6,000$ appears on the credit side of the Suspense Account. This means the Suspense Account had an initial debit balance, which signifies that the credit column of the original Trial Balance was shorter.

Therefore, the difference in the Trial Balance was $\textsf{₹ } \ 6,000$ (Excess Debit).

These are all errors of principle, where the transactions have been recorded in contravention of fundamental accounting principles. Specifically, these errors involve treating capital expenditure/receipt as revenue expenditure/receipt or vice versa. Since these errors involve incorrect debits and credits of equal amounts, they are two-sided errors and do not affect the agreement of the Trial Balance.

Rectifying Journal Entries

Explanation of Rectification Entries

(a) Furniture purchased wrongly debited to Purchases account:

• Principle Violated: A capital expenditure (purchase of an asset, Furniture) was treated as a revenue expenditure (purchase of goods).

• Rectification: Debit the correct asset account (Furniture A/c) and credit the wrongly debited expense account (Purchases A/c) to cancel the error.

(b) Machinery purchased recorded through Purchases Book:

• Principle Violated: Similar to (a), a capital expenditure was treated as a revenue expenditure.

• Rectification: Debit the correct asset account (Machinery A/c) and credit the wrongly debited Purchases A/c. Note that the credit to Raman was correctly posted from the Purchases Book, so it does not need rectification.

(c) Repairs on machinery debited to Machinery account:

• Principle Violated: A routine revenue expenditure (Repairs) was treated as a capital expenditure (addition to Machinery). This incorrectly increases the value of the asset.

• Rectification: Debit the correct expense account (Repairs A/c) and credit the wrongly debited asset account (Machinery A/c) to reduce its value.

(d) Overhauling cost of secondhand machinery debited to Repairs account:

• Principle Violated: Any expenditure incurred to bring a secondhand asset into working condition for the first time is a capital expenditure and should be added to the cost of the asset. Here, it was incorrectly treated as a revenue expense.

• Rectification: Debit the asset account (Machinery A/c) to correctly capitalize the cost, and credit the wrongly debited expense account (Repairs A/c) to cancel the error.

(e) Sale of old machinery credited to Sales account:

• Principle Violated: The proceeds from the sale of an asset should be credited to the respective asset account to reduce its book value. It was incorrectly treated as revenue from the sale of goods.

• Rectification: Debit the wrongly credited Sales A/c to cancel the revenue, and credit the correct asset account (Machinery A/c) to record the disposal.

These are complex, two-sided errors that also contain elements of one-sided errors due to incorrect amounts being recorded. A Suspense Account is necessary to rectify them because the debit and credit effects of the errors are unequal.

Rectifying Journal Entries

Explanation of Rectification Entries

(a) Furniture purchased ₹ 10,000 wrongly debited to Purchases A/c as ₹ 4,000:

• Rectification: Debit Furniture A/c with the correct amount (₹10,000). Credit Purchases A/c to cancel the wrong debit (₹4,000). The entry is unequal, so the difference (₹6,000) is credited to Suspense A/c.

(b) Machinery purchased from Raman ₹ 20,000 recorded through Purchases Book as ₹ 6,000:

• Rectification: Debit Machinery A/c with the correct amount (₹20,000). Credit Purchases A/c to cancel the wrong debit (₹6,000). Credit Raman's A/c to correct his balance (he was wrongly credited with ₹6,000 but should have been credited with ₹20,000, so a further credit of ₹14,000 is needed). The entry balances and Suspense A/c is not needed here.

(c) Repairs on machinery ₹ 1,400 debited to Machinery A/c as ₹ 2,400:

• Rectification: Debit Repairs A/c with the correct amount (₹1,400). Credit Machinery A/c to cancel the wrong debit (₹2,400). The entry is unequal, so the difference (₹1,000) is debited to Suspense A/c to make the entry tally.

(d) Overhauling cost ₹ 2,000 debited to Repairs A/c as ₹ 200:

• Rectification: Debit Machinery A/c with the correct capital expenditure amount (₹2,000). Credit Repairs A/c to cancel the wrong debit (₹200). The difference (₹1,800) is credited to Suspense A/c.

(e) Sale of old machinery ₹ 3,000 was credited to Sales A/c as ₹ 5,000:

• Rectification: Debit Sales A/c to cancel the wrong credit (₹5,000). Credit Machinery A/c with the correct book value (₹3,000). The difference (₹2,000) is credited to Suspense A/c to make the entry tally.

Suspense Account

Dr.Cr.

The balancing figure of $\textsf{₹ } \ 8,800$ on the debit side of the Suspense Account represents the original difference. An opening debit balance means the credit side of the original Trial Balance was heavier.

Therefore, the original difference in the Trial Balance was $\textsf{₹ } \ 8,800$ (Excess Credit).

The term "was not posted" can be interpreted in two ways. The most common interpretation is that the entire journal entry was completely omitted (a two-sided error). A second interpretation is that the entry was recorded in one book (e.g., a journal), but the posting to the respective ledger accounts was missed (a one-sided error affecting the Trial Balance). For questions (a), (b), (c), and (e), we will provide the solution for both interpretations. Question (d) is specific and is clearly a one-sided error.

(a) Depreciation provided on machinery ₹ 4,000 was not posted.

Interpretation 1: Error of Complete Omission

This assumes the entire adjusting entry for depreciation was never recorded. This is a two-sided error that would not affect the trial balance agreement.

Rectifying Journal Entry

Explanation: The rectification is to simply pass the correct journal entry that was originally missed. Depreciation is an expense (debit) and it reduces the value of the asset, Machinery (credit).

(b) Bad debts written off ₹ 5,000 were not posted.

Interpretation 1: Error of Complete Omission

This assumes the entire entry for writing off the bad debt was missed. This is a two-sided error.

Rectifying Journal Entry

Explanation: Bad Debts is a loss for the business (debit). This loss also reduces the amount recoverable from Debtors, an asset (credit).

(c) Discount allowed to a debtor ₹ 100 on receiving cash from him was not posted.

Interpretation 1: Error of Complete Omission

This assumes the discount part of the cash receipt entry was completely ignored. This is a two-sided error.

Rectifying Journal Entry

Explanation: Discount Allowed is an expense (debit). It reduces the amount owed by the Debtor (asset), so the Debtor's account is credited.

(d) Discount allowed to a debtor ₹ 100 was not posted to discount account.

This is explicitly a one-sided error. The entry was correctly made in the Cash Book, and the credit was correctly posted to the Debtor's account, but the debit posting to the Discount Allowed account was missed. This error would cause the trial balance to disagree, requiring a Suspense Account for rectification.

Rectifying Journal Entry

Explanation: The debit to Discount Allowed A/c, which was originally missed, is now given. Since only the debit side was affected, the Suspense Account is credited to complete the double entry for rectification.

(e) Bill receivable for ₹ 2,000 received from a debtor was not posted.

Interpretation 1: Error of Complete Omission

This assumes the entire entry for receiving the bill was omitted. This is a two-sided error.

Rectifying Journal Entry

Explanation: Bills Receivable is a new asset coming into the business (debit), and it reduces the amount owed by the Debtor, which is another asset (credit).

Alternate Solution (Assuming "not posted" means one-sided errors)

If we interpret "not posted" in (a), (b), (c), and (e) as a one-sided omission (e.g., only the personal account was posted but not the nominal account), the rectification would involve a Suspense Account for each. This interpretation is less common unless specified.

These are two-sided errors of commission where the correct accounts were debited and credited, but with an incorrect amount. The rectification involves passing a journal entry for the difference to either increase (for undercasting) or decrease (for overcasting) the amounts in the affected accounts.

Rectifying Journal Entries

Explanation of Rectification Entries

(a) Depreciation was under-posted:

• Error: The entry was posted with $\textsf{₹ }$ 400 instead of $\textsf{₹ }$ 4,000. Both Depreciation A/c and Machinery A/c are short by $\textsf{₹ } \ 3,600$.
• Rectification: Pass the original entry for the difference: Debit Depreciation A/c and Credit Machinery A/c with $\textsf{₹ } \ 3,600$.

(b) Bad debts were over-posted:

• Error: The entry was posted with $\textsf{₹ }$ 6,000 instead of $\textsf{₹ }$ 5,000. Bad Debts A/c is over-debited and Debtors A/c is over-credited by $\textsf{₹ } \ 1,000$.
• Rectification: Pass a reverse entry for the excess amount: Debit Debtors A/c and Credit Bad Debts A/c with $\textsf{₹ } \ 1,000$.

(c) Discount allowed was under-posted:

• Error: The entry was posted with $\textsf{₹ }$ 60 instead of $\textsf{₹ }$ 100. Both Discount Allowed A/c and Debtor's A/c are short by $\textsf{₹ } \ 40$.
• Rectification: Pass the original entry for the difference: Debit Discount Allowed A/c and Credit Debtor's A/c with $\textsf{₹ } \ 40$.

(d) Drawings of goods were under-posted:

• Error: The entry was posted with $\textsf{₹ }$ 300 instead of $\textsf{₹ }$ 800. Drawings A/c is short-debited and Purchases A/c is short-credited by $\textsf{₹ } \ 500$.
• Rectification: Pass the original entry for the difference: Debit Drawings A/c and Credit Purchases A/c with $\textsf{₹ } \ 500$.

(e) Bill receivable was over-posted:

• Error: The entry was posted with $\textsf{₹ }$ 3,000 instead of $\textsf{₹ }$ 2,000. Bills Receivable A/c is over-debited and Debtor's A/c is over-credited by $\textsf{₹ } \ 1,000$.
• Rectification: Pass a reverse entry for the excess amount: Debit Debtor's A/c and Credit Bills Receivable A/c with $\textsf{₹ } \ 1,000$.

These are all examples of one-sided errors of partial omission. In each case, one aspect of the double entry was correctly recorded, but the corresponding posting to the other ledger account was missed. Such errors cause the Trial Balance totals to disagree. To rectify them, a temporary account called the Suspense Account is used to complete the double entry for the rectification journal entry.

Rectifying Journal Entries

Explanation of Rectification Entries

(a) Depreciation not posted to Depreciation account:

• Error: The credit entry in Machinery A/c was correctly made, but the corresponding debit to Depreciation A/c was missed.

• Rectification: We now provide the missing debit to Depreciation A/c. The Suspense Account is credited to complete the double entry.

(b) Bad debts not posted to Debtors account:

• Error: The debit entry in Bad Debts A/c was correctly made, but the corresponding credit to Debtors A/c was missed.

• Rectification: We now provide the missing credit to Debtors A/c. The Suspense Account is debited to complete the double entry.