Correcting Accounting Errors

Accountants make a trial change to check the accuracy of the accounts. If the total debit balance does not match the total amount of credit balance, it is clear that certain errors have been committed while the transactions are recorded in the original or supplementary books book. It is very important that we find these bugs and fix them, only to make the final statements. We also know that all types of errors are not detected in the experimental balance since some of the errors do not affect the total amount of the experiment balance. So these can not be found by experimental equilibrium. The accountant has to invest his energy to find both types of errors and remedy them before trading, earnings and balance. Because if they are prepared before the correction, they will not give us the correct result and result, it is not the actual profit or loss.

Each accounting error is broken down as follows:

1. Theoretical errors

If the transaction is recorded against the accounting principles, it is in principle an error. For example, if revenue expenditure is treated as capital or vice versa

. Literal errors

These errors can be redistributed as follows:

(i) Failure errors

If a transaction is not wholly or partly recorded in the books, this is a bug. The transaction may have to be deleted from the posting of the original entry in the ledger account in relation to the entry of the original entry or the entry in the transaction.

(ii) Misdemeanors of the commission [19659002] If an item is incorrectly recorded, it is wholly or partly incorrectly written, counted, cast, or matured. Some of the commission's errors affect the experimental balance, while others do not. The errors that cause the test change can be detected by the experimental balance

(iii) Compensation of errors

Sometimes an error is offset by another error, so that the trial version does not detect. Such errors are compensated for errors

These errors can be divided into two groups for error correction:

(a) Only one account errors and

(b) Errors affecting two or more accounts

One account related errors

The affected errors may be: (a) Casting errors

(b) error in sending;

(c) 19659002] (d) settlement; and

e) leaving the test account

Firstly, such errors should be placed and corrected. They are entered in the account concerned by the log entry or explanatory note.

Correction

Accounting Errors Correction Steps [19659002] All types of errors can be remedied in two stages: [i] before the final reports are prepared; and

(ii) After Final Reports

Corrected Errors in the Settlement Period

Correct correction of the error is the transmission of the log entry that corrects the error, is committed and enforces the deployment you should have left it. But while the bugs are fixed before the final reports are made, in some cases correction can not be done with log entries because the errors are such. In general, before the final report is prepared, the correction process is as follows:

(a) Correction of errors on one side of an account These errors do not allow a trial balance agreement because only one side of an account can not be improve if correction is required before the final report is made. The amount so required is placed on the debit or credit side of the given account, as is the case. For example:

(i) A Sales Book that is issued by Rs. 500 in January. The mistake is to record the sales account credibility page in order to improve the sales invoice and the sales invoice: "By casting of sales book for January, Rs. 500." Explain: Since the sales book has been canceled under 500, it means that all invoices are not the sales invoice, only the sales account's credit rating is less than 500 francs.

(ii) A discount granted to the Marshall R 50 that has not been assigned to the discount account, meaning that the USD 50 credited on the discount account has not been charged, thus reducing the discount account's debit account by the same amount as the one previously it should have been left and the discount account must be corrected.

(iil) Goods sold incorrectly on X in the sales invoice. the error affects only the sales invoice because the amount paid on the credit side was incorrectly charged to the debit side of the same account. To improve this, the amount of the transaction is doubled on the sales account's credit side, writing "Past mistakes for sales to X". [19659002] (iv) Sum of Rs. 500, paid to Y and not paid into his personal account. This error only affects the Y account and the personal account of the debit page. 500 due to failure to publish the amount paid. We are now writing the debit page. "For cash (leave for posting) 500 Rs.

Fixing Two or More Accounts Mistakes on Both Pages

Because these errors affect two or more accounts, fixing such errors, Final Reports often use the log entry

Correction of errors during the next accounting period

As mentioned earlier, it is advisable before the end of the year-end report to be prepared before the end of the year-end report find and fix errors, but in some cases where after a major search the accountant can not find the errors and in a hurry to prepare the final report of the activity to report a traffic or income tax refund, the difference between the experimental balance and the newly opened You will be transferred to a "suspended account." In the next accounting period, when and when the errors are found, these errors are corrected by reference to the error account. If all errors are discovered and corrected, the suspension account will be automatically closed. It should be remembered that mistakes that can be made to complete the trial change can only be corrected by the suspension account. Attempts that do not affect the change of trial can not be set with a suspense account. For example, if it is found that the debit amount of the experimental balance was lower than the Rs. 500 on the grounds that Wilson's account was not paid for Rs. 500, the following rectification entry must be entered.

Difference in Trial Change

Trial Balance only refers to errors that are affected by errors that are corrected by the hangout account. Therefore, a spreadsheet is calculated for calculating the difference between the suspension account. If the suspension account is debited in the "correction record", the amount will be charged to the debit page of the spreadsheet, on the other hand, if the debit creditor is credited, the amount will be placed on the credit side of the table, and the balance will then be calculated and reverted to the suspense account. The difference is attributed to the debit side of the dependent account The effects of the errors in the closing account

1. The errors in the profit and loss account

It is important to note that an enterprise must have one or more of the company's net profit One point to remember here, that only invoices that transfer the trading and earnings statements at the time of making the final accounts have the effect of net gains, which means that only the errors on the nominal accounts and on the account of the goods will affect the net profit. Increases or Reduces Net Profits

The effect of errors or correction on profit-taking rules has an impact on understanding:

(i) If an error causes a nominal account to receive some charge, profit will decrease or losses will increase, and when they are eliminated, profits will increase and losses will decrease. For example, the machine is being redesigned to Rs. 10,000, but the amount charged for machine repair – this error reduces the profit. When the payment is corrected, the amount will be transferred to the machine account from the machine repair account and will increase the profit

(il) If an error has been omitted from recording the debit page of the nominal account, this will result in a gain or loss reduction. Correcting this mistake must be counter-productive, which means that profit decreases and losses increase. For example, rent paid to the lessor, but the amount was charged to the lessor's personal account – this increases the profit as rental costs are reduced. When fixing the error, we will publish the amount required for the rent, which will increase rental costs and thus reduce the profit.

(iil) Profit will increase or losses will decrease if the nominal account is incorrectly credited. By correcting the error, the profit will decrease and the losses will increase. For example, the investments were sold and the amount was credited to the sales invoice. This error increases your profit (or reduces losses) if you correct the same mistake, the amount is transferred from the sales account to the investment account, which results in a decrease in sales, which results in a decrease in profit (or increase in losses) [19659002] (iv) Profit will decrease or losses will increase if an account is left out of the nominal or on the credit side of the merchandise account. If the same thing is cleansed, it will increase your profit or reduce your losses. For example, the commission received is to be credited to the commission account. This error will reduce your profit (or increase your losses) as no earnings are credited to the profit and loss account. If the error is corrected, it will have a negative impact on profit and loss as the income statement is credited as additional revenue, so profit will increase (or decrease in loss). If any failure results in a gain or loss, the capital account will also be affected as the gain is credited and the losses are charged to the capital account, so the capital will also increase or decrease. As the capital is shown on the balance side of the balance sheet, errors in the nominal account will also affect the balance. So we can say that the nominal invoice or the item account showed the balance sheet result and the balance as an error

. Weighing errors only

If you make a mistake on a real or personal account, it will result in the assets, liabilities, debts or creditors of your business and as a result only affect the balance. as these items are only recognized in the balance sheet and the balance sheet is prepared after the profit and loss account has been drawn up. So if your cash account, bank account, asset, or source account fail, then only the balance will be affected.

Source by Anil Kumar Gupta

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