28 March 2018

Type of errors in accounting

In accounting there are two types of error, one is "Errors of principle" & another is "Clerical Errors". Clerical errors can be farther divided in 3 categories, they are: "Errors of commission" , "Errors of omission" & "Compensating Errors". Continue reading to understand each of them...
(You are also suggested to watch the video given above in full screen.)

1. Errors of principle: Whenever any capital transaction missconceptually treated as revenue transaction or vice-versa , it will be called an error of principle. Example: Machinery purchased for office use, wrongly debited to "Purchase account", instead of "Machinery account".

2. Clerical Errors: All other errors, which are not errors of principle, are clerical errors. all three categories of clerical errors are given below:

 2.1. Errors of commission: Whenever you choose incorrect accounts or write the incorrect amounts while recording an entry, it will be called error of commission. Example: Rs. 5000 receipt in cash wrongly taken in bank account, or wrongly entered as Rs. 500...

 2.2. Errors in omission: Whenever you forgets to post one or more sides of an entry, it will be the Error of omission. Example: Cash paid to creditor, recorded in cash ledger but omitted in creditor's account.

2.3. Compensating Errors: It is the coincidental event when two or more errors occurred such a manner, where one compensating another(s), to match the debit and credit balance. Hence, it is tougher to be detected. Example: Commission paid Rs. 500 wrongly recorded as 5000 and in the same book of accounts salary paid Rs. 5000 wrongly recorded as Rs. 500.

Reverse charge entry in Tally

So, you want to learn that how to record entries for reverse charge mechanism in tally erp9, Well, But first you have to know what is the incidence for RCM. Please read the article carefully to know what the RCM actually is?

To make it simple I recommend you to watch the video given above, till the end, where I demonstrated how to record all the relevant entries with Tally ERP9, After reading this article:

Consider yourself as a registered dealer. Now whenever you makes any purchase from another registered dealer, you will get a tax invoice, which includes all details regarding that supply along with the GSTIN number of the supplier. So, in  this case you nothing have to do, to claim your ITC. Because your supplier collects all taxes from you and makes all required formalities to pay the tax to the authority. And obviously it will be auto populated in your GSTR2 once the suppler submit the same with his/her GSTR1.

Now think what if your supplier is an unregistered dealer? What if any registered dealer purchase anything from an unregistered dealer? In this case you have to take the burden to pay all the taxes, as you are the registered one. However, you can also claim the paid tax as ITC, once you pay the tax as recipient liability.

Hence, whenever a registered dealer purchase any taxable goods/service from an unregistered dealer, it will attract the incidence of RCM.