## Explanation

If a transaction is recorded in the subsidiary book with the incorrect amount, both the debit and credit entries made subsequently in the ledger will be incorrect despite being equal in terms of figures. Of course, this will not affect the trial balance.

## Effect on Accounts

The effect on accounts will be either one of the following:

• If the recorded transaction is less than the correct amount, the relevant ledger accounts will be under-debited and under-credited.
• If the recorded transaction is more than the correct amount, the relevant ledger accounts will be over-debited and over-credited.

## Rectification Entry

If a transaction is recorded at less than the correct amount:

• Debit the difference to the under-debited account
• Credit the difference to the under-credited account

If a transaction is recorded in the subsidiary book at more than the correct amount:

• Debit the difference to the over-credited account
• Credit the difference to the over-debited account

## Example

An invoice issued to Sara Jason for \$4,760 was entered into the sales book at \$4,670 and posted to the ledger accordingly. As such, the account was under-debited by \$90, while the sales account was under-credited by the same amount.

A check for \$2,390 was received from David. It was recorded in the cash book and posted to the ledger at \$2,930. This means that the cash at bank account was over-debited and David’s account was over-credited by \$540.

### What if the debit and credit entries were wrong in the subsidiary book?

If a transaction is recorded in the subsidiary book with the incorrect amount, both the debit and credit entries made subsequently in the ledger will be incorrect despite being equal in terms of figures. Of course, this will not affect the Trial Balance.

### What is the effect on the accounts if the recorded transaction in the subsidiary book is more than or less than the correct amount?

If the recorded transaction is more than the correct amount, the relevant ledger accounts will be over-debited and over-credited. If it is less than accurate, they will be under-debited and under-credited.

### How do you identify errors in posting?

Errors in original entry are identified when a transaction recorded in the subsidiary book is posted to a wrong account or in a wrong column in the ledger. The amount will not tally with that of the initial transaction and subsequent entries made afterwards in the same journal or subsidiary books.

### How will you post errors in the original entry?

The errors in original entry will be adjusted through a debit or credit memo. It is then posted to the relevant accounts in the ledger.

### What are errors in posting?

Errors in posting occur when financial transactions are recorded incorrectly either in the journal or subsidiary books. As well as being incorrect, these figures affect all subsequent entries made in the ledger.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.