balance by putting the difference on shorter side as ‘suspense account’.

B. Process of rectification
The process of rectification using suspense account can be understood with the help of the following
example:
C. Practical Example
(a)Credit sales of Mohan Rs. 10,000 were not posted to his account. This is an error of partial
omission committed while posting entries of the sales book.
Wrong effect has been:
Mohan’s A/c Dr. Nil
To Sales A/c 10,000
Correct effect should have been:
Mohan’s A/c Dr. 10,000
To Sales A/c 10,000
The rectification entry will be:
Mohan’s A/c Dr. 10,000
To Suspense A/c 10,000
(b) Credit sales to Mohan Rs. 10,000 were posted to his account as Rs. 7,000 an error of commission.
Mohan’s account has been debited with Rs. 7,000 of Rs. 10,000 resulting in short debit of Rs.
3,000.
Wrong effect has been:
Mohan’s A/c Dr. 7,000
To Sales A/c 10,000
Correct effect should have been:
Mohan’s A/c Dr. 10,000
To Sales A/c 10,000
The rectification entry will be:
Mohan’s A/c Dr. 3,000
To Suspense A/c 3,000
(c) Credit sales to Mohan Rs. 10,000 were posted to his account as Rs. 12,000. This is an error of
commission.
The Wrong effect has been:
Mohan’s A/c Dr. 12,000
To Sales A/c 10,000
Correct effect should have been:
Mohan’s A/c Dr. 10,000
To Sales A/c 10,000
The rectification entry will be:
Suspense A/c Dr. 2,000
To Mohan’s A/c 2,000
(d) Purchases book overcast by Rs. 1,000. Errors in casting of subsidiary by affect only those
accounts where totals of the subsidiary books involved are posted. The accounts of individual
parties are not affected. Consider the following example.
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 Purchases (Journal) Book
Date Invoice No. Name of suppliers (Accounts to be credited) L.F. Amount Rs.
Dheru 8,000
Chandraprakash 7,000
Sachin 6,000
21,000
Wrong total due to overcasting 22,000
Dheru’s Account
Dr. Cr.
Date Particulars J.F. Amount Rs. Date Particulars J.F. Amount Rs.
By Purchases 8,000
Chandraprakash’s Account
Dr. Cr.
Date Particulars J.F. Amount Rs. Date Particulars J.F. Amount Rs.
By Purchases 7,000
Sachin’s Account
Dr. Cr.
Date Particulars J.F. Amount Rs. Date Particulars J.F. Amount Rs.
By Purchases 6,000
Purchases Account
Dr. Cr.
Date Particulars J.F. Amount Rs. Date Particulars J.F. Amount Rs.
To Sundries 22,000
As you can notice that there is no error in accounts of Dheeru, Chanderprakash and Sachin. Only
purchases account has been debited with Rs. 1,000 extra. Hence, rectification entry will be :
Suspense A/c Dr. 1,000
To Purchases A/c 1,000
D. Summary
If the trial balance does not tally due to the existence of one sided errors, accountant has to carry
forward his accounting process and prepare financial statements. The accountant tallies this trial
balance by putting the difference on shorter side as ‘suspense account’.

7.10 Summary
To check the arithmetic accuracy of the journal and ledger accounts, trial balance is prepared. We
have seen that after preparing ledger accounts a trial balance is taken out where debit and credit
balances are separately listed and totalled”. If the two totals do not agree, it is definite that there
have been some errors.
There are various types of errors, which is illustrated by the flowchart.
Even if there is only a very small difference in the trial balance, the errors leading to it must be
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located and rectified. A small difference may be the result of a number of errors. So there are some
steps for solving it or remove errors.
Errors should never be corrected by overwriting. If immediately after making an entry it is clear
that an error has been committed, it may be corrected by neatly crossing out the wrong entry and
making the correct entry.
There are some errors which affect one side of an account or which affect more than one account in
such a way that it is not possible to pass a complete rectification entry. In other words, there are
some errors which can be corrected, if detected at this stage, by making rectification statement in
the appropriate side(s) of concerned account(s). It is important to note here that such errors may
involve only one account or more than one account.
Rectification of errors often assumes that it was carried out before the books were closed for the
concerned year. However, sometimes, the rectification is carried out in the next year, carrying
forward the balance in the Suspense Account or even transferring it to the Capital Account.

7.11 Key Words

Trial Balance: After posting the accounts in the ledger, a statement is prepared to show separately
the debit and credit balances. Such a statement is known as the trial balance.
Rectification of Errors: Errors should never be corrected by overwriting. If immediately after
making an entry it is clear that an error has been committed, it may be corrected by neatly crossing
out the wrong entry and making the correct entry.
After Trial Balance but Before Final Accounts: The method of correction of error indicated so
far is appropriate when the errors have been located before the end of the accounting period. After
the corrections the trial balance will agree.
Wrong Entry: Wrong entry of the value of transactions and events in the subsidiary books, Journal
Proper and Cash Book may occur.
Wrong Posting from Subsidiary Books: Subsidiary books are totalled periodically and posted to
the appropriate ledger accounts. There may arise totalling errors. Totalling errors may arise due to
wrong entry or simply these may be independent errors.
Wrong Casting of Subsidiary Book: For example, wrong castings of the Cash Book result in
balancing error.
Wrong Casting of Ledger Balances: Likewise Cash Book, any ledger account balance may be
cast wrongly. Obviously wrong postings make the balance wrong; but that is not wrong casting of
balances.
Errors of Principle: When a transaction is recorded in contravention of accounting principles,
like treating the purchase of an asset as an expense, it is an error of principle.
Clerical Errors: These errors arise because of mistake committed in the ordinary course of the
accounting work. These are of three types:
Errors of Omission: If a transaction is completely or partially omitted from the books of account,
it will be a case of omission. Examples would be: not recording a credit purchase of furniture or not
posting an entry into the ledger,
Errors of Commission: If an amount is posted in the wrong account or it is written on the wrong
side or the totals are wrong or a wrong balance is struck, it will be a case of “errors of commission.”

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Compensating Errors: If the effect of errors committed cancel out, the errors will be called
compensating errors. The trial balance will agree.

7.12 Self Assessment Questions

I. Pick up the correct answer from the given choices:
1. (i) Goods purchased from A for Rs. 10,000 passed through the sales book. The error
will result in
(a) Increase in gross profit. (b) Decrease in gross profit.
(c) No effect on gross profit. (d) Either (a) or (b).
(ii) If a purchase return of Rs. 1,000 has been wrongly posted to the debit of the sales
returns account, but has been correctly entered in the suppliers’ account, the total of
the
(a) trial balance would show the debit side to be Rs. 1,000 more than the credit
(b) trial balance would show the credit side to be Rs. 1,000 more than the debit
(c) the debit side of the trial balance will be Rs. 2,000 more than the credit side.
(d) the credit side of the trial balance will be Rs. 2,000 more than the debit side.
(iii) If the amount is posted in the wrong account or it is written on the wrong side of the
account, it is called
(a) error of omission (b) error of commission
(c) error of principle. (d) compensating error.
(iv) If a purchase return of Rs. 84 has been wrongly posted to the debit of the sales
return a/c, but had been correctly entered in the suppliers account, the total of the
trial balance would show :
(a) the credit side to be Rs. 84 more than debit side.
(b) the debit side to be Rs. 84 more than credit side.
(c) the credit side to be Rs. 168 more than debit side.
(d) the debit side to be Rs. 168 more than credit side.
Ans. 1 [(i)-(a); (ii)-(c); (iii)-(b); (iv)-(d)]
2. State which statements complete correctly the sentences given below:
(i) Rs. 200 paid as wages for erecting a machine should be debited to
(a) Repair account (b) Machine account
(c) Capital account (d) Furniture account
(ii) On purchase of old furniture, the amount of Rs. 1,000 spent on its repair should be
debited to
(a) Repair account (b) Furniture account
(c) Cash account (d) Bank account
(iii) Goods worth Rs. 50 given as charity should be credited to
(a) Charity account; (b) Sales account
(c) Purchases account (d) Expenses account.
(iv) Goods worth Rs. 100 taken by proprietor for domestic use should be credited to
(a) Sales account; (b) Proprietor’s personal exp. account
(c) Purchases account (d) Expenses account

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 (v) Errors of commission do not permit;
(a) Correct totalling of the balance sheet; (b) Correct totalling of the trial balance;
(c) The trial balance to agree (d) None of the above
(vi) The preparation of a trial balance is for :
(a) Locating errors of commission (b) Locating errors of principle
(c) Locating clerical errors (d) All of the above.
(vii) Rs. 200 received from Smith whose account, was written off as a bad debt should
be credited to :
(a) Bad Debts Recovered account; (b) Smith’s account;
(c) Cash account (d) Bad debts account
(viii) Purchase of office furniture Rs. 1,200 has been debited to General Expense Account.
It is:
(a) A Clerical error; (b) An error of principle;
(c) An error of omission (d) Compensating error
(ix) Goods destroyed by fire should be credited to
(a) Goods lost by fire account; (b) Sales account
(c) Purchase Account (d) Cash Account
[Ans. 2 : (i)-(b); (ii)-(b); (iii)-(c); (iv)-(c); (v)-(c); (vi)-(c); (vii)-(a); (viii)-(b); (ix)-(a);
(x)-(b)]
II. From the given information, choose the most appropriate answer.
1. Classify the following errors under (a) Errors of omission; (b) Errors of commission; (c)
Errors of principle; and (d) Compensating errors.
(i) The total of sales book was not posted to the ledger.
(ii) Sales to Heena Rs. 143 was posted to Meena as Rs. 143.
(iii) Goods taken away by the proprietor for personal use not recorded anywhere.
(iv) The total of a folio in the sales book Rs. 1,000 was carried forward as Rs. 100.
(v) Repairs of newly purchased second-had machinery debited to repairs accounts.
[Ans. 1: (i)-b); (ii)-(b); (iii)-(a); (iv)-(b); (v)-(c)]
2. Point out the type of the errors given below : (put 1 against errors of omission, 2 against
errors of commission, 3 against errors of principle, 4 if it is not an error).
(a) Sale of Rs. 120 was written in the purchases book.
(b) Salary paid to Ram, has been debited to his account.
(c) Purchase of furniture has been entered in the purchases book.
(d) Rs. 120 received from Ganesh has been debited to his account.
(e) Freight paid on machinery has been debited to the freight account.
(f) The discount columns of the cash book have not been posted.
(g) Repairs to buildings have been debited to the buildings account.
(h) The total of the Sales Book is Rs. 100 short.
(i) The sale of worth Rs. 337 has been posted as Rs. 373.
(j) The amount of a dishonoured bill has been debited to general expenses account.
[Ans. 2: - 1:(f); 2:(a) (d) (h) (i); 3: (b) (c) (e) (g) (j)]
III. Given below are the questions containing multiple answers. Choose the correct
answer(s).
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