Class 11 Trial Balance and Rectification of Errors

Preparing a trial balance, the kinds of errors, rectification entries, the suspense account, and how correcting an error changes the profit.

Key ideas

A trial balance lists ledger balances on a date: assets, expenses, drawings and losses on the debit side; capital, liabilities, revenues and gains on the credit side.

Agreement proves only arithmetic accuracy: errors of principle, omission, two-sided commission and compensating errors do not show.

An error of principle mixes capital and revenue items (furniture debited to purchases, repairs debited to machinery, installation wages debited to wages).

Omission leaves a transaction out; commission puts a wrong amount or the wrong person’s account; compensating errors cancel each other.

A two-sided error is rectified by one entry between the wrong and the right accounts, with no suspense account.

A one-sided error (wrong casting, short posting, wrong-side posting, an item not posted) is rectified through the suspense account, which then closes.

On rectifying, profit rises when an expense was overstated or an income left out, and falls the other way; errors between personal or asset accounts leave it unchanged.

Remember

Capital (balancing figure)

total debit balances − other credit balances

Furniture debited to purchases

Furniture A/c Dr. To Purchases A/c (profit up)

Repairs debited to machinery

Repairs A/c Dr. To Machinery A/c (profit down)

Sales book undercast

Suspense A/c Dr. To Sales A/c (profit up)

Payment to a creditor not posted

Creditor’s A/c Dr. To Suspense A/c (no effect on profit)

Posted to the wrong side

correct with twice the amount

Original suspense balance

Suspense credited in rectification: it had a debit balance; debited: a credit balance

Correct net profit

profit before + increases − decreases

Worked example

A trial balance’s difference was put in a suspense account. After these were rectified it closed: (1) Cash of ₹6,500 received from Nisha was posted to the debit of Nisha’s account. (2) Discount allowed of ₹3,000 to a customer was not posted to the discount allowed account. What was its original balance? (a) the amount (b) debit or credit

Working: Suspense A/c Dr. ₹13,000 To Nisha A/c ₹13,000 (Being cash from Nisha posted to the wrong side, now rectified); Discount Allowed A/c Dr. ₹3,000 To Suspense A/c ₹3,000 (Being discount allowed not posted, now rectified)

Answer: (a) ₹10,000; (b) credit

Trial Balance and Rectification of Errors

Key ideas

Remember

Watch out

Worked example