Rectification Entries, With Examples

When an error is committed in the books of accounts, the same should be corrected to show true numbers in financial statements. If the error is immediately identified, it may be fixed by striking out the wrong entry and replacing it with a correct one. However, if the error is identified at a later stage, the correction should be made by passing a suitable journal entry, such entries used to fix an accounting error are called rectification entries.

Now a days with software packages if a journal entry has been posted to the ledger it usually requires rectification entry, however if it is still at a preliminary stage of validation it may still be corrected without the need of an additional entry. Errors are required to be rectified before finalization of books of account.

 

Stated below are types of errors and their respective rectification entries illustrated with examples:

Rectification Entry for Errors of Omission

Omission made for purchase of Machinery worth 50,000, the same can be rectified by passing a simple double entry that can record debit and credit aspects of this transaction. The following entry shall be passed:

Rectification Entry for errors of omission

(Rectification of missing entry for purchase of machinery)

After the above rectification cash can be posted in cash book and cash account. Office equipment can be entered to office equipment ledger account which means error has now been corrected.


 

Rectification Entry for Errors of Commission

Purchase of goods from Mr.Z aggregating to 10,000 erroneously entered in the ledger of Mr.B. To rectify this error, we will have to reverse Mr. B’s account and have to credit Mr. Z’s account with amount of goods purchased.

 

Correct Entry which should have been passed

Errors of Commission 1

Wrong Entry

Errors of Commission 2

Rectification Entry

3

(Rectification of wrongly posted purchases to Mr B’s A/C)

Another way of rectifying this is to reverse the wrong journal entry & then pass a fresh corrected journal entry which would ultimately lead to the same result. 


 

Rectification Entry for Errors of Principle

Sale of Building for 10,00,000 entered in Sales Account.

Building is a fixed asset hence it should be entered in building account. Therefore, we will have to rectify sales account by debiting it and crediting the same to building account.

 

Correct Entry which should have been passed

Principle1

Wrong Entry

Principle2

Rectification Entry

Principle3

(Rectification of entry passed in Sales account by mistake for Sale of Building)


 

Rectification Entry for Errors of Compensation

Rent income is overstated by 10,000 and salary expense is overstated by 10,000.

Since rent income has credit balance and salary expense has debit balance, the overstatement of rent income balance will offset the overstatement of salary account balance. There will not be any effect on the trial balance. Rectification of the same shall be done by reducing Rent Income and Salary Expense.

 

Error of Principle

(Being rectification of entry passed for reversal of Income over expense)

 

> Read What is Suspense Account?