Credit sales to Rajni ₹ 5,000 recorded in Purchases book. This is an error of ... State the wrong entry recorded in the book of accounts. Correct effect should have been: The rectification entry will be:
(Correct Effect) Rajni's A/c Dr. 5,000 To Sales A/c 5,000 (Being credit sales to Rajni recorded)
(Error Type) Error of Principle
(Rectification Entry) Rajni's A/c Dr. 10,000 To Purchases A/c 5,000 To Sales A/c 5,000 (Being rectification of sales recorded as purchases)
(Wrong Entry) Purchases A/c Dr. 5,000 To Rajni 5,000 (Being credit sales to Rajni recorded in Purchases book)
Explanation
This is an error of principle because a revenue transaction (Sale) was treated as an expense transaction (Purchase), violating fundamental accounting principles. The context identifies this specific problem in 'Test Your Understanding - II' and provides examples of rectifying incorrect recordings (like the 'Mohan' examples) by reversing the wrong effect and applying the correct one. The rectification entry combines the reversal of the wrong entry (Credit Purchases, Debit Rajni) with the recording of the correct entry (Debit Rajni, Credit Sales).
Solution Steps
Step 1: Identify the nature of error. Sales recorded in Purchases book implies Purchases A/c was wrongly debited and Rajni's A/c was wrongly credited instead of Sales A/c being credited and Rajni's A/c being debited.
Step 2: Record the Wrong Entry passed. Based on 'recorded in Purchases book': Purchases A/c Dr. (Debited) 5,000; Rajni's A/c (Credited) 5,000.
Step 3: Record the Correct Entry that should have been passed. Based on 'Credit sales to Rajni': Rajni's A/c Dr. (Debited) 5,000; Sales A/c (Credited) 5,000.
Step 4: Calculate the Rectification Entry. To correct the accounts:
- Debit Rajni's A/c by 5,000 (to reverse wrong credit) + 5,000 (to apply correct debit) = 10,000.
- Credit Purchases A/c by 5,000 (to reverse wrong debit).
- Credit Sales A/c by 5,000 (to apply correct credit).