rectification of errors after preparing the final accounts Sometimes, though there is disagreement of trial balance, due to lack of time and urgency in the completion of final accounts, the accountant may not locate and rectify the errors. Under such circumstances, the difference in trial balance is placed to the suspense account, which may show either debit balance or credit balance. If it shows a debit balance, it is shown on the assets side. If it shows a credit balance, it is shown on the liabilities side.
The errors will be located and rectified by the accountant during the next accounting period. If the error to be rectified is in a nominal account, it affects the profit or loss of the business. Hence, instead of debiting or crediting them for rectification, profit and loss adjustment account is debited or credited. If the error to be rectified is in a real account or personal account, the respective real Accountancy account or personal account itself is debited or credited for rectification.
After all the errors are rectified, the net effect on profit is calculated by preparing profit and loss adjustment account and the balance is transferred to capital account. . Errors in computerised accounting In the recent years, because of the technological developments, many firms have computerised their accounting. It is done to save time and to have accuracy.
Though certain errors of commission such as casting errors, errors in carrying forward, etc. and errors of partial omissions can be avoided, the following errors become unavoidable: Errors of complete omission Errors of principle Errors of making wrong entry in the books of original entry Errors of entering wrong amounts in the books of original entry Errors of entering wrong accounts in the books of original entry Errors of duplication The duality concept is applied in locating and rectifying errors. Student activity Think: Prepare transactions with errors and ask your friend to solve. Points to remember • Error means recording or classifying or summarising the accounting transactions wrongly or omissions to record them by a clerk