Errors may arise at the time of journalising, posting, balancing or preparation of trial balance.
Errors affecting the agreement of trial balance or errors disclosed by the trial balance are known as single sided errors.
These are the errors due to which the trial balance does not agree.
Single sided errors can be classified as error of partial omission and error of commission.
Error of commission can be further classified as related to ledger and related to subsidiary books. Single sided errors include error of casting, error in carry forwarding, wrong balancing totaling of an account, error of posting of wrong amount etc.
Error management can be executed in three steps prevention of errors, detection of errors and rectification of errors.
Rectification of single sided errors can be done at two stages, first when errors are located and rectified before preparing the Trial Balance and when errors are located and rectified after preparing the Trial Balance.
In the first stage, no rectification entry is required, amount is written on the debit or credit side of the account which has been affected by the error.
When rectification of errors is done after preparation of trial balance, in this case, one sided errors are rectified by opening a new account called ‘Suspense Account.’
A suspense account is an imaginary account in which the amount of difference in the trial balance is put till the time; all errors are located and rectified.
Steps for rectification of one-sided errors include verify the columnar total of Trial Balance; check that the balances of all accounts in the ledger are written in the andcorrect column of trial balance.
Errors affecting either Trading Account or Profit and Loss Account will affect the net profit. Only nominal accounts will affect the Profit and Loss account.