Impact of rectification of error on profit and loss account

dear sir,in one of your following videos(rectification of errors) where you have talked about the first example in which the journal entry is (purchase a/c debited to bank) (furniture a/c debited to purchase) sir i want to that how will this effect my ledger accounts.

2.In ledger accounts if we are having debit or credit balance does it concludes that its a profit if there is a debit balance and loss if it has a credit balance


asked Apr 22, 2015 in Rectification of Errors by hussain (38 points) 815 views

1 Answer

0 votes
In that example actual purchase of Furniture which is an asset was wrongly debited to Purchase A/c.  Hence the rectificying entry was:

Furniture A/c     Dr.

  To Purchase A/c

Due to this entry Furniture will increase and Purchases will reduce.  The amount by which purchases reduce, by the same amount profits will increase.

I wish to clarify here that LEDGER is a book which contains all the accounts related to incomes, expenses, assets and liabilities including capital.  From the ledger all the expenses accounts are transferred to the debit side of Trading & Profit and Loss A/c and all Revenue Accounts/Income Accounts are transferred to the credit side of Trading & Profit and Loss A/c.  The Assets are shown on the right hand side (Asset Side) of the Balance Sheet and Liabilities including capital are shown on the left hand (Liabilities side) of the Balance Sheet.

If total of credit side of Trading & Profit and Loss A/c is greater than the debit side there is profit otherwise there is loss.

answered Apr 23, 2015 by jbsclasses (3,971 points)