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The question should give further info as to the nature of the transaction for us to be able to come up with an adjusting entry, if required. And what year are we making the adjustment?
hence the books are closed for the last year, the wrong entry will effect the trading a/c (Purchase & COGS) eventually the net profit . it will also affect the creditors balance in BS. in order to avoid this we have to scrutinize all ledger account before closing the book for a financial year. Only possible credit entry in purchase is purchase return . if it is not a return , make a rectification entry by debiting purchase and crediting the suppliers by the beginning of next year and make a note for the same .
Rectification entry to be done because the purchase a/c and creditors a/c have been reduced by passing the wrong entry( The stock also must be reduced)
Again post the actual purchase entry by debiting purchase with exact stock and amount and credit suppliers account .
1. (Assuming previous year to be20x3-20x4, as this Financial Year is20x4-20x5)
As the wrong entry is pertaining to the last year, rectification of this error will eventually effect the profit of the last year (i.e.,20x3-20x4) ultimately effecting the Capital A/c. All those entries affecting the P&L A/c, i.e., all those postings of Trading & Profit & Loss A/c should be replaced with Adjusted Profit & Loss A/c. After rectification the balance of Adjusted P&L A/c should be transferred to Capital A/c.
2. The wrong entry as mentioned is : - (Bills Payable A/c Dr. To Purchase Cr.) Assuming that you wanted to Credit the Supplier for the payment, but wrongly credited it to the Purchase A/c. The rectification correct entry
Purchase ..........Dr. xxx (Supplier name)........Cr.
