Home » Accounting Explanation » Rectification of Errors - Errors not affecting Trial Balance agreement


Examples of rectifying entries

Rectifying entry for errors of omission

Error: A purchase of office equipment worth $5000 was completely omitted from books by mistake

Since the purchase of office equipments was not entered in either office equipments account or cash account, we need to pass a simple double entry that can record debit and credit aspects of this transaction.

The rectifying entry should be:

  DESCRIPTION DEBIT CREDIT



   Office equipments   $5000



               Cash   $5000




Having passed this rectification entry, cash can be posted in cash book and cash account and office equipments can be entered to office equipment ledger account which means error has now been corrected


Rectifying entry for errors of commission

Error: A purchase of goods amounting to $500 from Mr. Z was entered in Mr. B account due to  a mistake

In this case, we have purchased goods from Mr. Z but by mistake we have credited Mr. B account or entered the transaction in Mr. B account. To correct this mistake, we have to cancel Mr. B’s account and have to credit the Mr. Z account with amount of goods purchased

The wrong entry that we have made by mistake

  DESCRIPTION DEBIT CREDIT



   Purchases   $500



                    Mr. B   $500






The right entry that we should have passed

  DESCRIPTION DEBIT CREDIT



   Purchases   $500



                    Mr. Z   $500






The rectifying entry that will correct the error

  DESCRIPTION DEBIT CREDIT



   Mr. B   $500



                    Mr. Z   $500





We have debited Mr. B's account to cancel the effect of error and credited Mr. Z's account to complete the original entry. Remember that we don't have to debit the purchase account because it has already been posted correctly

Look at the effect of rectifying entry on Mr. B and Mr. Z accounts




DEBIT
Mr. B Account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Mar. 31Mr. Z (Error rectificaiton)

$500

Mar. 31 Purchases



$500











DEBIT
Mr. Z Account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT




Mar. 31 Purchases
(which was entered in Mr. B's account by mistake)

$500








Rectifying entry for errors of principle

Error: A sale of building for $50,000 was entered in sales account

Building is a fixed asset that should be entered in building account and it can't be credited to sales account. Therefore, we would cancel sales account by debiting it and we would enter sale of building to building account by crediting building account.

The wrong entry that we have made by mistake

  DESCRIPTION DEBIT CREDIT



   Cash   $50,000



                        Sales   $50,000






The right entry that we should have passed

  DESCRIPTION DEBIT CREDIT



   Cash   $50,000



                        Machinery   $50,000






The rectifying entry that will correct the error

  DESCRIPTION DEBIT CREDIT



   Sales   $50,000



                        Machinery   $50,000





By debiting sales we have cancelled the effect of error and by crediting machinery we have entered the transaction in a place where it should be. No need to adjust cash since it is already in its right place i.e debit side of the cash account


Rectifying entry for errors of compensation

Error: Rent income is overstated by $100 and salary expense is overstated by $100 as well.

Since rent income usually has credit balance and salary expense has debit balance, the overstatement of rent income balance will offset the overstatement of salary account balance. Therefore, trial balance will remain balance

The rectifying entry should be:

  DESCRIPTION DEBIT CREDIT



   Rent income   $100



                            Salary expenses   $100





Credit balance of rent income account and debit balance of salary expense account has been overstated by $100. To correct the error we just have to reverse the balances i. e we would debit the credit balance of rent income account and credit the debit balance of salary expense account