Rectification of errors is a process through which the errors or mistakes committed while writing the books of accounts are connected.
It should be kept in mind that the error should never be corrected by overwriting or erasing because it reduces the authenticity of accounting records and gives the impression that something is being concealed.
Different types of Rectification of errors:
From the rectification point of view, all errors can be classified into the following two categories:
A) Rectification of errors which do not affect the trial balance.
B) Rectification of error affecting trial balance.
These are discussed below:
A) Rectification of errors which do not affect the trial balance: These errors are committed in two or more accounts simultaneously, as a result, the total of both debit and credit remains the same.
Such errors do not affect the agreement of trial balance. Such errors are also known as two-sided errors.
They can be rectified by recording a journal entry giving the correct debit and credit to the concerned accounts.
Following types of errors are included in this category:
I) Omission to pass an entry in the books of original entry.
II) Wrong recording of a transaction in the books of original entry.
III) Posting to the wrong account,
IV) Errors to principle.
Rectification process of two-sided errors:
The rectification of two-sided errors involves the following steps:
I) Cancelling the effect of wrong debit or credit by reserving it, and
II) Restoring the effect of correct debit or credit.
B) Rectification of errors Affecting the trial balance: Errors affecting the trial balance is also termed as one-sided errors. One-sided errors are those errors which affect only one account.
If, for example, a sum of Rs. 4,000 paid to Barun account, the error will be termed as a one-sided error because the errors exist in one account only i.e. in the account of Barun only.
Such type of errors occur in the following cases:
I) When a subsidiary book is undercast or overcast.
II) When the posting to one of the accounts involved in the transaction has not been made.
III) When the posting is made on the wrong side of the account.
IV) When the wrong amount has been posted in one of the accounts involved in the transaction.
Rectification process of one-sided Errors: Rectification process of one-sided errors or error affecting the agreement trial balance will depend on the stage of detection of the error.
For example, the error may be located or detected before the preparation of trial balance or after the preparation of trial balance and so on.
Stages of location and Rectification of error: Errors should be rectified as and when they are located. The procedure to be followed for rectification depends on the stage at which errors are rectified.
Various stages which are explained below:
A) Rectification of error located in the books of original entry before its posting to the ledger.
B) Rectification of error located after its posting to the ledger but before the preparation of trial balance.
C) Rectification of error located after the preparation of the trial balance but before the preparation of Final account.
D) Rectification of error after the preparation of Final accounts.
What is the Rectification of One-sided errors?
Rectification of one-sided errors location after its posting to the ledger but before the preparation of the trial balance does not require journal entry.
Only the amount is written on the debit or credit side of the account which is affected by the error.
For example, the total of the sales book for the month of April is undercast by Rs. 7,000. In order to rectify this error, the amount of Rs. 7000 will be put on the credit side of the ‘sales account’ by writing the words ‘By undercasting of sales book for the months of April’.