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Saturday, February 27, 2010

Rectification of Errors

As error is a mistake and rectification denotes act of correcting the errors that have already committed in the books of accounts. In other words, rectification of error is a complex job of removing the effect of an error by replacing with correct situation which requires a sound knowledge of the fundamental principles of book-keeping and accounting. Whenever an error is found, it must be rectified because if the errors are not rectified, the profit, the profit or loss and financial position shown by final account will not be accurate.

Methods of Rectifying Errors:
Rectification of errors in the books of account by rubbing or cutting or tearing or putting ink or t-pex etc, reduces the authenticity of accounting records. They may be not be valid too. So, the appropriate methods rectifying errors must be applied. Generally errors are rectified by the following ways:
  1. If an error is located in the subsidiary books before posting in ledgers wrong figure should be truck off and correct figure should be written above the wrong figure by drawing a straight line over the wrong figure.
  2. If a wrong figure has been posted in ledger account, it also may be rectified by neatly crossing out the wrong figure by a single line and writing correct figure above the crossed figure.
  3. If the errors are located after a long time (after closing of books of accounts), it must be rectified by passing journal entries.

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