How to Correct an Accountant's Prior Error

Greeting Sir.....

I am having doubts on how to Account for Expenditure/plant and equipment current year that was recorgnised as an expense to prior year.....

Here goes the ques...Its in compliance to IFRS

In preparing the 20x5 Financial statements of J co Ltd, the accountant discovered that $50,000 of expenditure in august 20x3 has been incorrectly treated as an expense for the financial year ending 30 june 20x4. The expenditure should have been treated as plant and equipment.
Advice, how accountant should correct for this error when preparing thr 20x5 plant and equipment statement...??

My Understanding

-is that expense must be deleted in exp....therefore describing in its notes the reasons for its cancellation due to meeting the nature (not meeting the rev. and capital expenditure))

-Also to INSERT PPE into Non-Current assets of balance sheet......stating the reason in the notes (probable, reliability, economic benefits n stuff....))

-the main confusion is, should i revalue the amount due to a 2 yr gap in between and is there any scientific way to account for the $50,000?


Sarnit from Fiji
Sarnit! It is the nature of human being that he or she does mistake because we want to learn by practical. Before telling your problem's solution, I want to tell that today, my elder brother started to repair electric button in our house. He do not know the work of electricity. So, he just guessed for linking of two wires and result was burning of some wire of our house. Power lost. After this, a big bill of expert electrician's service has been paid. From this, I educate  that we can not stop others for doing mistakes. But, we learn a new lesson from other's mistakes. Enjoy this learning of life!

In your case, mistake was done by prior accountant because he did not know the difference between revenue expenditure and capital expenditures. Revenue expenditure decrease our capital but capital expenditure increases our capital. Before rectification of this error, we understand this error's effect.

1. # Due to this error, our profit was shown less in that financial year. It means our capital is showing less because we add less profit with same amount.

2. # Our financial position is showing less from two years with same amount.

3. # We did not calculated depreciation from 2 years. Due to this, profit and loss account and balance sheet are not showing correct result.

Rectification of Error

In the books of 2005, you will pass following rectification of this error entry

Plant and Machinery Account Dr.

Capital Account  Account or Reserve and Surplus Account Cr.

{ You can not show plant and machinery account Dr. to revenue expenditure account because that revenue account was closed and its affect has absorbed in capital account. This entry is just like your recover your lost capital.  In footnote, you can tell that we deduct plant and machinery account as revenue expenditure and same amount has been deducted from capital. You have to show amount after deducting two years depreciation. }

Important : You have to calculate net effect of income tax of this mistake. Either you have to pay or you have to apply for refund of income tax due to this. 






access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar Control Your Spending corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Finance Journal Entries Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents Partnership pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching Wealth wikipedia working capital youtube
Accounting Education: How to Correct an Accountant's Prior Error
How to Correct an Accountant's Prior Error
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock