Top 5 Types of Journal Entries / Types of Rectifying Entries

Top 5  Journal Entries Types :

1.   Opening Entries :

In opening entries,  we will record only those business transactions  which balances are carry forward to the next accounting year. Assets, liabilities  and capital balances are carry forward to the next year  for the purpose of knowing the total assets and total debts and obligations etc.

 

 

For writing credit entry it is depends upon your willing that whether you want to write TO with credit entries or you want to intend it as I did in above picture.

 

 

2.  

  Closing Entries :

In this type of entry, the expenses and revenues balances are closed and we transferred their balances in Trading or profit and Loss Account  for closing them .

 

 

    Adjusting Entries:

3. These entries are made at the end of the accounting period . In this entries assets and liabilities are recorded with their real or true values and revenues are recorded by following the matching principle concept. According to this Matching Principle Concept, we will record only those expenses which are followed by revenues. In adjusting entries, we will have all of these :

1.    Deferral :

It means that you will received or paid an advance amount but yet we  have not delivered services and we have not used that assets for which you will pay in advance. So, basically deferrals is your prepaid means advance payment .

There are further two types of Deferrals :

·       Prepaid or deferral Expenses

For instance we will pay fee first, then we will studied and we will pay rent in advance then we are utilizing that assets in the form of house. So, payment in advance is our assets until we don’t utilize it completely.

·       Deferral revenues or Unearned revenues

For instance we will take an advance salary for our installation of machinery but we have not delivered our services yet so this revenue is unearned so  now  it is our responsibility to provide them services . In this way , unearned revenue is our liability till we have not delivered services. 

2.    Accruals

It means that we will received any goods or  services or used   but yet not paid it means that it is payable and outstanding.

There are further two types of accruals:

·       Accrual expenses

For instance we will purchase goods on credit so it is accrual expense.

·       Accrual revenues

For instance we will give goods on credit  to customers but  yet not received any revenue so it is our accrual revenue.

4.       Transfer Entries :

Transfer entries are important for transferring the correct or right account name and amount from one account to another.

For instance Aqsa purchased a furniture for RS/-2,000 and table for RS/-3,000 . Accountant had recorded total amount of 5,000 to furniture account. So in this case, we will pass an transfer entry :

             Table Account                        Debit with RS/-3,000

   To Furniture Account         Credit with RS/-3,000

    (Being an amount of Furniture overwritten now it is posted to table account )

5.      Rectifying Entries : 

th  entries are passed for the purpose of removing a mistake and make it correct. Sometimes, there is also a mistake in amounts as well. For instance in  given below  example it might be possible that it would be overstated or understated. We will make the entry correct by passing an rectified entry. If Ali Account is wrongly debited than we will credited Ali Account for correction in rectified entry and add the correct account in it. There are many types of rectifying entries:

1.    Error  of Commission:

In this error, it is posted to wrong account instead of right account.

Cash received from Abdullah  RS/- 7,000 posted to Ali .  So, rectified entry will be :

Ali Account                           Debit with  RS/-7,000
To Abdullah Account             Credit with RS/-7,000
(Being cash received from Abdullah was  wrongly posted to Ali  account now it is rectified)

2.    Error of Omission:

In this errors, we will completely omit or forget to record the business transaction. It is corrected by simply passing the entry.

3.    Error of Compensation:

This type of error is very difficult to find out because it is not a single error ,it is a  group or two error. In which one error  is offset against the another  error or account.  For instance  if fee charges paid RS/-1,000 is debited in the fee account as RS/-1,500 and the Rent  received RS/-2,000 is credited in the  Rent account as RS/-2,500, then the excess debit of RS/-500 in Fee account is set off against the excess credit in the Rent  account.

4.    Error of Original Entry:

   In this type, there is a mistake in the  recording of the amounts of accounts whether it will be overstated or understated. If the amount is recorded more than its original amount then it is called overstated and if the amount is recorded less than its original amount  then it is understated. For instance if rent received from Ali was wrongly credited with RS/-5,000 instead of RS/- 50,000. Then we will simply subtract the amount because it is overstated 50,000- 5,000 = 45,000 . So, 45,000 will be recorded in rectified entry.

 

Cash Account                             Debit with 45,000

  To Rent  Account                     Credit with 45,000

5.    Error of Principle:

In this accounts are posted to the correct side but  of the wrong type of account, For instance

In this principle, the names of accounts are wrongly passed. Such as Ali account is wrongly debited instead of Sim account.

For instance   RS/-4,000  paid to Sim was recorded in Ali Account so in this case we will pass an rectifying entry:

 

Sim Account                             Debit with RS/-4,000

 To Ali Account                        Credit with RS/- 4,000

     (Being amount paid to Sim was wrongly debited to Ali account but now it is rectified)

6.     Errors of Reversal:

When the entry is  wrongly debited instead of being credited and when it is wrongly credit instead of being debited is called error of reversal.

7.    Error of Transposition :

When two digits or numbers  are reversed  is called transposition error.  For example 8907 instead of 9807.

8.    Error of Duplication:

It is occur  when  we will recorded an entry two times or it is duplicated, it's debited or credited twice for the same entry. For example, an  Salaries Expense  was debited twice .