Professional Documents
Culture Documents
Helps in comparison
• Comparison of ledger account balances of one year with the corresponding balances with the previous year helps
the management taking some important decisions. This is possible by using the Trial Balances of the two years.
Compensating errors -
Types of Errors
Steps to locate errors
Total the Dr & Cr. Columns of the TB. Check the total of the group
balance like Sundry Debtors. Total all the sundry debtors and then check
wit the TB balance
Find the exact difference in TB. Look for such accounts with the same
amount or twice the difference
While posting the account of Mr. Roy from the sales book, the sale of 3,600 has
been credited to him.
Goods received back from Ali, a customer for Rs 1,500 have not been entered in
the return inwards book at all.
Furniture for office purchased from Ravi has been entered in the Purchase book.
A. The total of the return outwards book, 2,100 has not been posted in the
ledger.
B. A purchase of Rs 4,000 from Saran has been entered in the Sales book.
However, Saran’s account has been correctly credited.
C. A sale of Rs. 4,300 to Ramakant has been credited in his account as Rs.3,400
D. A sale of Rs 2,960 to Krishnen has been entered in the sales book as Rs.
2,690
E. Old furniture sold for 5,400 has been entered in the sales account as Rs
4,500
F. Goods taken by proprietor for Rs, 1000 has not been entered in the books at
all.
Correction in the next period
Rectifications discussed so far assumes that it was
carried out in the same year. However,
sometimes rectifications are carried out in the
net year, carrying forward the balance in the
suspense account.
For nominal accounts, the corrections should be
made through a special styled account – “Profit
and Loss Adjustment Account” and the balance of
this account at year end is taken to the Capital
Account thereby no impact to current years PnL.
Real or Personal Account balances should be
adjusted in normal way.