Introduction
Errors are common in accounting and can occur due to mistakes in recording or posting entries. When errors affect the trial balance, a Suspense Account is temporarily used to balance the accounts until the errors are corrected. This post addresses how to rectify various accounting errors assuming a Suspense Account was opened.
Main Body
Rectification of Errors
Below are the errors and their respective rectification journal entries:
- Error: A purchase from Anthony & Co. for Rs. 8,000 was not entered in the Purchases Book.
Entry:
Purchases A/c Dr. 8,000
To Anthony & Co. 8,000 - Error: Rs. 500 received from Mr. Roy was credited to Ray’s A/c.
Entry:
Ray’s A/c Dr. 500
To Roy’s A/c 500 - Error: Sale of Rs. 600 to Gopal was debited as Rs. 6,000.
Entry:
Suspense A/c Dr. 5,400
To Gopal’s A/c 5,400 - Error: Salaries paid Rs. 1,000 wrongly debited to Wages A/c.
Entry:
Salaries A/c Dr. 1,000
To Wages A/c 1,000 - Error: Rs. 450 received on account of interest was wrongly credited to Commission A/c.
Entry:
Commission A/c Dr. 450
To Interest A/c 450 - Error: Returns Outwards Book total Rs. 560 not posted.
Entry:
Sundry Creditors A/c Dr. 560
To Returns Outwards A/c 560 - Error: A credit sale of Rs. 250 to Rakesh was wrongly credited to his account.
Entry:
Rakesh’s A/c Dr. 500
To Sales A/c 250
To Suspense A/c 250 - Error: A credit sale of Rs. 520 to Madhu was debited as Rs. 250.
Entry:
Madhu’s A/c Dr. 270
To Suspense A/c 270 - Error: A credit purchase from Kailash of Rs. 400 was wrongly debited.
Entry:
Suspense A/c Dr. 800
To Kailash’s A/c 800 - Error: Discount Allowed Rs. 304 carried forward as Rs. 403.
Entry:
Suspense A/c Dr. 99
To Discount Allowed A/c 99
Conclusion
Rectification of errors ensures that the books of accounts reflect true and fair financial information. The use of a Suspense Account helps temporarily correct the trial balance while errors are being identified and rectified. Once all errors are corrected, the Suspense Account should ideally show a zero balance and be closed.