Rectification of Errors – Questions & Answers

Q1. What are accounting errors?
A: Accounting errors are mistakes in recording, classifying, or summarizing financial transactions. They may be clerical or procedural in nature.

Q2. What is the difference between an error of omission and an error of commission?
A:

• Error of Omission: A transaction is completely or partially omitted from the books.

• Error of Commission: The transaction is recorded, but incorrectly (e.g., wrong amount or account).

Q3. What type of error affects the trial balance?
A: Errors like wrong totaling, posting to the wrong side, or entering wrong amounts can cause the trial balance to disagree.

Q4. What is a Suspense Account?
A: A Suspense Account is temporarily used when the trial balance does not tally. Errors are identified and corrected later, and the account is closed.

Q5. Is rectification required after final accounts are prepared?
A: Yes, errors found after final accounts must be rectified using the Profit & Loss Adjustment Account.

Q6. How is an error rectified if the correct entry was not passed at all?
A: The correct journal entry is passed as if it’s being recorded for the first time.

Q7. What is an error of principle?
A: When an entry violates accounting principles, such as treating a capital expense as revenue or vice versa.

Q8. Give an example of a compensating error.
A: If purchase is undercast by ₹1,000 and sales are also undercast by ₹1,000, the errors compensate each other and the trial balance still agrees.

Q9. What is the impact of rectification on the profit & loss account?
A: Rectification may increase or decrease profits, especially if expenses or incomes were wrongly recorded earlier.

Q10. What is an error of omission?
A: When a transaction is completely or partially not recorded in the books of accounts.

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