Rectification of Errors in Accounting – Types of Errors, Suspense Account & Step-by-Step Examples (2025 Guide) - BizGrowth Pro

In accounting, rectification of errors is one of the most important topics for Class 11, Class 12, B.Com, CA Foundation, CMA Foundation, CS Foundation students and practising accountants. Even the most careful book-keeper can make mistakes while recording transactions. If these errors are not corrected on time, they will affect the Trial Balance, Profit & Loss Account, and Balance Sheet.

This complete 2025 guide explains all types of errors, which errors affect trial balance, which do not, how to rectify them, and the role of Suspense Account with practical examples.

What is Rectification of Errors?

Rectification of errors means correcting the mistakes made during journalising, posting, balancing, or carrying forward in the books of accounts. The golden rule is: “Correct the error by passing a rectification journal entry following the double-entry principle.”

Classification of Errors in Accounting

Errors are broadly classified into two categories:

1. Errors Disclosed by Trial Balance (One-Sided Errors)

These errors affect only one side of the trial balance, so the trial balance will not tally. These are easy to locate.

Type of Error	Example	Effect on Trial Balance
a) Error in casting (totalling)	Total of Purchase Book overcast by ₹1,000	Debit > Credit by ₹1,000
b) Error in posting (wrong side)	Sales ₹5,000 posted to debit side of Sales A/c	Debit excess ₹10,000
c) Error in posting (wrong amount)	Rent paid ₹4,500 posted as ₹5,500	Debit excess ₹1,000
d) Omission of posting one side	Cash received from debtor ₹10,000 – only Cash A/c debited, debtor not credited	Debit excess ₹10,000
e) Error in carrying forward	Balance of Sales A/c ₹1,50,000 carried forward as ₹1,05,000	Credit short ₹45,000

2. Errors Not Disclosed by Trial Balance (Two-Sided Errors)

These errors affect both sides equally, so trial balance tallies even though books are wrong.

Type of Error	Example
a) Error of Omission	Goods sold to Ramesh ₹20,000 completely omitted from books
b) Error of Commission	Goods sold to Anil ₹15,000 wrongly recorded as sale to Sunil ₹15,000
c) Error of Principle	Machinery purchased ₹1,00,000 debited to Repairs A/c
d) Compensating Errors	Purchases overcast by ₹5,000 and Salaries also overcast by ₹5,000
e) Error of Complete Reversal	Paid to creditor ₹8,000 → Creditor Dr. and Cash Cr. (wrong) → Correct: Cash Dr., Creditor Cr.

Step-by-Step Rectification Process

1. Identify the type of error
2. Find out the correct double entry
3. Pass the rectification journal entry
4. If trial balance does not tally → open Suspense A/c temporarily
5. When actual error is found → clear Suspense A/c

Role of Suspense Account

When the trial balance does not tally and the exact error is not immediately traceable, the difference is put into a temporary account called Suspense Account.

• If Debit > Credit → Suspense A/c is credited
• If Credit > Debit → Suspense A/c is debited
• Suspense A/c appears in trial balance until all errors are rectified
• Final goal: Suspense A/c balance must become zero

Rectification of Errors – Practical Examples (With Journal Entries)

Example 1: Error in Posting Amount (One-Sided Error)

Salary paid ₹18,500 was posted as ₹15,800 to Salary A/c.

Rectification Entry:

text

Salary A/c                Dr.  2,700
    To Suspense A/c               2,700
(Being short posting of salary rectified)

Example 2: Error of Complete Reversal

Paid to Mohan ₹25,000 was recorded as: Mohan A/c Dr. 25,000 To Cash A/c 25,000 (Wrong)

Correct entry should be: Cash Dr., Mohan Cr.

Rectification Entry:

text

Cash A/c                   Dr.  50,000
    To Mohan A/c                        50,000
(Being reversal entry rectified – double the amount)

Example 3: Error of Principle

Furniture purchased ₹80,000 debited to Purchases A/c.

Rectification Entry:

text

Furniture A/c              Dr.  80,000
    To Purchases A/c                   80,000
(Being furniture wrongly debited to purchases now rectified)

Effect: Cost of goods sold decreases → Gross Profit increases

Example 4: Error of Omission

Credit sale to Vijay ₹35,000 not recorded at all.

Rectification Entry:

text

Vijay A/c                  Dr.  35,000
    To Sales A/c                       35,000
(Being omitted credit sale now recorded)

Example 5: Compensating Errors

Purchases overcast by ₹4,000 and Rent undercast by ₹4,000.

No rectification needed because they cancel each other, but for understanding:

text

Purchases A/c              Dr.  4,000
    To Rent A/c                        4,000

Example 6: Use of Suspense Account (Comprehensive Example)

Trial Balance of M/s Gupta Traders on 31st March 2025 did not tally. Total Debit = ₹8,95,000 Total Credit = ₹8,85,600 Difference = ₹9,400 (Debit excess)

Step 1: Put difference in Suspense A/c

text

Suspense A/c               Dr.  9,400
    To Difference in Trial Balance     9,400

Later following errors were found:

1. Sales Book undercast by ₹5,000
2. Purchase of machinery ₹25,000 debited to Purchases A/c
3. Credit purchase from Ravi ₹8,400 recorded as ₹4,800

Rectification Entries:

text

Suspense A/c               Dr.  5,000
    To Sales A/c                        5,000

text

Machinery A/c              Dr.  25,000
    To Purchases A/c                    25,000

text

Purchases A/c              Dr.  3,600
    To Ravi A/c                         3,600
(8,400 – 4,800 = 3,600 short debited)

Now Suspense A/c balance = 9,400 – 5,000 = ₹4,400 (Dr.) But after all rectification, Suspense A/c becomes zero → Trial Balance tallies.

Summary Table: Types of Errors and Their Rectification

Type of Error	Affects Trial Balance?	Rectified By	Suspense A/c Needed?
Error in casting	Yes	Rectification entry	Yes (temporary)
Wrong side posting	Yes	Reversal + correct	Yes
Error of omission	No	Recording omitted entry	No
Error of principle	No	Transfer to correct head	No
Compensating errors	No	Individual rectification	No
Complete reversal	No	Double the amount entry	No

Pro Tips for Students & Professionals (2025)

• Always start rectification from the date of original error
• Use “Being… now rectified” narration in exams
• Suspense A/c is only a temporary arrangement
• In Tally Prime / Busy / MargERP → Go to Gateway of Tally → Display → Exception Reports → Rectify easily
• For GST audit, rectification of errors is compulsory before filing GSTR-9

Conclusion

Mastering rectification of errors and suspense account is crucial for preparing accurate financial statements. Even a single unrectified error can change the entire profit figure and mislead stakeholders.

Practice at least 20–30 rectification entries daily, and you will score full marks in this chapter in any exam – CBSE, ISC, CA Foundation, or university level.