Errors are often committed in subsidiary books. These are sales book, purchases book, sales return and purchases return books. These common errors in the subsidiary books can be categorized as follows-
- Errors of omission- forgetting to record an entire transaction in the subsidiary books
- Under casting in subsidiary books
- Overcasting in subsidiary books
Remember the old saying; “It is never too late to mend.” Mistakes which were completely omitted can be easily rectified by passing a correct entry which was earlier omitted from being passed. For example, X has returned goods. These goods returned by X were considered into stock, but no corresponding entry was passed through the books of accounts. While rectifying this entry, a correct entry regarding the return of goods should be passed.
Subsidiary books do not have both credit and debit sides. Either do they have a credit or debit balance. Errors in subsidiary books are thus restricted to totals only. Sometimes, it can either be totally short or totally more- either under cast or overcast. This mistake can be rectified by taking into consideration the nature and type of that subsidiary book.
Errors related to overcasting and under casting are discussed as follows-
- Sales Book
Sales book are used only for crediting the sale of goods. Transactions like credit sales of assets and cash sales of goods are not recorded here. Since the sales account is always credited for sale, the sales book always shows a credit balance. With the sales book only having a credit side, the mistakes here are specific to undercasting or overcasting.
In a case of being undercast, the total of sales books is credited shortly. To rectify it, one has to either make a posting on the credit side of the sales account or credit the sales account directly. Similarly, overcasting of a sales book means to over credit the sales. Thus, for rectifying it, the sales account needs to be debited to correct the excess amount which was credited.
Thus, mistakes occurred due to overcasting or undercasting in a sales book can be mended by posting at the respective debit or credit side of this sales account. It can even be done by opening a suspense account.
- Purchases Book
Purchases book is used only for crediting purchases of goods. Once goods are acquired, the purchases account gets debited. No matter what kind of purchases it is, the business gets goods. Thus, with every incoming of good, the account has to be debited.
It is a universal accounting truth that a book of purchases only has a debit balance. Undercasting purchase book will mean that purchases book has either been technically debited short or has been shortly added. A rectification of this entry will be by debiting the purchases account.
In case there is an overcasting in the purchases book, it depicts that it has either been debited more or totaled more. Rectifying this error will be crediting purchases account which will reduce the total of the purchase book. This error has its effect only on the purchases account- both incases of overcasting and undercasting. Based on the mistake, rectifications can be made accordingly.
- Sales Return or Returns Inward Book
Sales Return means the returning of goods by the debtors to their creditors. Since it is in reverse to the sales which have got credit balance, a sales return depicts the debit balance. In a case of error in overcasting in the sales return book, the sales return needs to be credited. Similarly, in a case of under casting, it has to be debited with a lesser amount. Here, a rectification entry needs to be passed with debiting the sales return account.
One can even rectify mistakes in overcasting and undercasting both by raising a suspense account or not even opening one.
- Purchases Return or Returns Outward Book
Goods which were purchased on credit need to be recorded in the purchases return book once returned. Since a purchases book depicts a debit balance, a purchases return book will automatically depict a credit balance. This is because purchases return is opposite to purchases. An undercasting in the purchases return book means that there has either been short of crediting or under crediting.
For rectifying this mistake of undercasting, one needs to credit the returns outward account or purchases return account. Similarly, in a case of an overcasting in the returns outward book, the purchase return account needs to be debited.
- Bills Receivable
In the book of bills receivable, an accountant needs to record the details of bills which his company has drawn on their debtors. Once it is drawn, a bill needs to be accepted by the respective debtor. After its acceptance, the ‘debtors’ account gets replaced by another account, termed as the bills receivable account. This account depicts a debit balance just like other assets.
An under casting here indicates writing a lower amount on the debit side and for rectifying this mistake, the bills receivable account needs to be debited. Similarly, in the case of overcasting, he needs to credit the bills receivable account. This error can be rectified even by opening a suspense account or not by raising one.
- Bills Payable
It is the debtors who draw bills payable on their creditors. These are the liability of a creditor and carry a credit balance. If there occurs an overcasting in the bills payable account, it means to have been credited with more amount of money.
To rectify this error, one needs to debit the bills payable account. In the case of the bills payable account being undercast, it depicts to have been credited with lesser value. Rectifying this will be to credit the bills payable account. Further, this error can be rectified with or without raising a suspense account for the same.
However, it is important to note that in case the errors are located before ledger accounts are closed, necessary rectification can be made without even opening a suspense account. Mistakes are often located after a trial balance has been prepared with its difference being placed in the suspense account. For rectifying this, a suspense account needs to be opened.
During examinations, students often need to solve questions where it is not mentioned if these errors were found before or after preparing the trial balance. In such cases, errors are assumed to have been located after the trial balance has been prepared. During such situations, students are advised to rectify the mistakes by opening a suspense account. Unless and until it is instructed not to use a suspense account, this should be the preferred approach.