By Non- graded, we mean that it will not be included in your semester GPA (No weightage in final marks).
TOPIC TO BE TESTED:
DUE DATE: 17TH FEBRUARY 2014
• “Rectification of Errors”
LEARNING OBJECTIVES:
To develop an understanding about rectifying the errors in the books of accounts.
ASSIGNMENT QUESTION
Following errors have been found in the books of ABC Corporation which maintained their accounting record under periodic inventory system.
S.No.
Found Errors
1 Sale of goods worth Rs. 10,000 on credit basis to Mr. A was wrongly passed through the purchase book.
2 Purchase of goods amounting to Rs. 20,000 from Mr. B was wrongly passed through the sales book.
3 An amount of Rs. 5,000 paid for the installation of plant and machinery was wrongly debited to wages account.
4 Sale of old furniture amounting to Rs. 10,000 was passed through the sales book.
5 A purchase of Rs. 2,000 from Mr. C was wrongly passed through the return outwards book.
6 A sale of Rs. 3,000 to Mr. D was wrongly passed through the return inwards book.
7 Goods sold to Mr. Y of Rs. 945 have been wrongly entered in the sales book as Rs. 495.
8 Return inwards of Rs. 1,000 from Mr. Z was omitted to record in the books of accounts.
Required:
Pass the rectified journal entries in the books of accounts.
IMPORTANT:
Grace period of extra 24 hours after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.
IMPORTANT INSTRUCTIONS
Take help from internet for collecting the information.
Carefully watch relevant lectures and consult the relevant material from handouts along with recommended books.
Attempt the assignment by yourself and it will be entertained positively.
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
Make sure to upload the solution file before the due date on VULMS.
Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
Use the font style “Times New Roman” or “Arial” and font size “12”.
It is advised to compose your document in MS-Word format.
You may also compose your assignment in Open Office format.
Use black and blue font colors only.
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
It is submitted after the due date.
The file you uploaded does not open or is corrupt.
It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.
It is cheated or copied from other students, internet, books, journals etc.
Accounts involved are incorrectly mentioned in the given table of assignment even if the rules of debit and credit are correctly mentioned. So be careful to mention the accounts involved against each transaction.
Note related to load shedding: Please be proactive Dear students!
As you know that Post Mid-Term semester activities have been started and load shedding problem is also prevailing in our country now a days. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBS
Q. How errors can be rectified?
Rectification of Errors:
Errors Effecting One Account
These Types pf errors may occur due to the following reasons:
1. Wrong Castings
2. Wrong Balancing
3. Wrong Posting
These errors are not difficult to locate. These are located during the course of preparation of the trial balance. Hence, there is no need to pass any journal entry to rectify these errors. The error is rectified by giving proper explanatory note or by crossing the wrong figure with red ink line and writing the correct figure above the crossed out figures. However, if the error is discovered after finalization of the Trial Balance, a journal entry is passed with the help of a Suspense Account.
1. Error of Casting:
Casting is a process of totaling the amount of transaction at the end of a certain period. It is a mistake in totaling the books of original entry.
Observe the following:
Sales Book
Year
1992
April 5
April 15
April 16
April 24
Amrita
Anita
Hira
Chanda
1,500
2,000
1,400
1,000
4,900
The correct total should be Rs. 5,900.
2. Error of carry forward/brought forward:
This type of error occurs when the total of one page is copied wrongly on the next page. In this case, the same procedure as discussed above should be followed.
3, Error of Posting:
Error of posting may be of two types:
a) Posting to correct account but either with wrong amount or on wrong side or both.
b) Posting to wrong account with correct amount or wrong amount or wrong side with wrong amount.
Type (a) error of posting affects only one account whereas type (b) error affects two accounts. While correcting the mistake at the posting stage, it should be presumed that the transaction has been recorded correctly in the books of original entry.
Errors Effecting two or more Account
Such errors may include:
1. Errors of Omission
2. Errors of Recording
3. Errors of posting to wrong account
4. Errors of principle
1. Errors of Omission
This type of error occurs when the transaction is omitted from being recorded in the books of accounts. The omission affects the subsidiary book and the individual account of the item not recorded in the subsidiary books.
E.g.
Purchase of goods Rs. 5,000 from X & Co. is omitted.
In this case, two accounts are affected. Purchase Account as the total of Purchase Book is added short by Rs. 5,000. Personal Account of X & Co. will be affected. Purchase of Rs. 5,000 is not credited to X & Co.’s Account. Hence the rectification entry will be:
Purchase A/c Dr. 5,000
To X & Co.’s A/c 5,000
2. Errors of Recording
The transaction recorded in a wrongful manner affects two accounts as follows:
a) It affects the total of the particular book and the concerned account of that book
b) The individual account is also affected.
E.g.
Goods worth Rs. 450 returned by Ajay recorded as Rs. 45.
In this transaction, Return Inward Book shows an entry of Rs. 45 as against Rs. 450. Similarly, Mr. Ajay’s Account is also affected as it is posted with wrong amount. The rectification entry will be:
Return Inwards A/c Dr. 405
To Ajay’s A/c 405
3. Error of principle
This type of error occurs when the principle of accounting is violated. Such an error distorts the profit or loss. At this stage following points should be remembered:
a) when as asset is purchased:
i) It should be debited to Asset Account and not to Purchase Account.
ii) All expenses regarding purchase of an asset and its installation should be debited to the respective Asset Account and not to Expense Account.
iii) Amount spent on repairs of the second hand asset purchased should be debited to the respective Asset Account and not to Repairs Account.
b) When as asset is sold:
i) It should be credited to Asset Account and not to Sales Account
ii) Any expenses incurred in connection with sales should be debited to Asset Account and not to the Expenses Account.
mGT101 - Financial Accounting Assignments No.01 Solution Fall 2013
