| Bookkeeping, if not handled well, can result in big | | | | rectification, bookkeepers will post the necessary |
| blunders that can affect the strategic growth as well | | | | amount in the rent account column. This, in turn, will |
| as the image of a company. We will see how the | | | | show an increase in the expenditure aspects and so |
| errors and their rectification influence the over-all profit | | | | profits also will get reduced. |
| of the organisation. So, being knowledgeable about | | | | If it so happens that a nominal account is credited |
| some of the rules are helpful in understanding more | | | | wrongly, the profit is set to increase, or otherwise the |
| about the different aspects of bookkeeping. If due to | | | | losses will decrease. When this error is corrected, the |
| an error a nominal account has been extended debit, | | | | profit aspect will decrease and loss aspect will |
| the profit will witness a decrease or the loss will go | | | | increase. As for an example, the invested property |
| increasing. But, when error gets rectified, the profits will | | | | was sold and the amount got credited to the account |
| show an increase and the losses will show a | | | | of sales. This error resulted in an increase in the profits. |
| decrease. For instance, the machinery in a company is | | | | Then when the error sees rectification, the amount has |
| overhauled for Rs.100000, but the bookkeepers have | | | | to be transferred from sales account to account of |
| debited the amount to machinery repairs account. This | | | | investments. Due to this correction, sales will show a |
| is an error that will definitely reduce the profit. In the | | | | reduction that leads to a dip in profit. |
| rectification process, what needs to be done is that | | | | Getting to the errors affecting the balance sheet, if an |
| the sum has to be transferred to machinery account | | | | error is made in a personal account, it will have |
| from machinery tinkering and repairs account; and, this | | | | considerable effect on the assets, liabilities and debtors |
| correction will increase the profits. | | | | or creditors of the company. The result is that it will |
| In the case of the amount being omitted from | | | | show the effects on the balance sheet only. These |
| recording in the debit column of a nominal account, | | | | items are made known in just the balance sheet; |
| what happens is that there will be an increase in profits | | | | remember that balance sheet is prepared only after |
| or a decrease in the case of losses. The correction will | | | | the profit and loss account gets completed. So, if there |
| yield a reverse effect, and that means the profit will | | | | happens to be some error in cash/bank account and |
| get reduced and the loss percent will witness an | | | | asset/liability account, it will practically affect only the |
| increase. For instance, in the case of rent paid to | | | | balance sheet. Rectification of bookkeeping errors has |
| landlord being debited to personal account of landlord, | | | | to be undertaken at the outset itself, when it becomes |
| there is an increase in the profit as the expenditure | | | | obvious. This way, the financial aspects related to a |
| towards rent gets reduced. As the error sees | | | | company will stay accurate and up to date. |