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Correction of errors

The document outlines six types of errors that can occur in accounting that are not detected by a trial balance: errors of omission, commission, original entry, principle, compensating errors, and complete reversal. Each error type is defined with an example illustrating how it affects the accounting records. Understanding these errors is crucial for accurate financial reporting.

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7 views2 pages

Correction of errors

The document outlines six types of errors that can occur in accounting that are not detected by a trial balance: errors of omission, commission, original entry, principle, compensating errors, and complete reversal. Each error type is defined with an example illustrating how it affects the accounting records. Understanding these errors is crucial for accurate financial reporting.

Uploaded by

azha2805
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Errors which are not shown by the trial balance

1. Errors of omission
2. Errors of commission
3. Errors of originality
4. Errors of principle
5. Compensating errors
6. Errors of complete reversal

1. Errors of omission
This occurs where a transaction has been completely omitted from the books.
Example: A sale invoice to D. Riley $ 575 was completely omitted from the books.
Date Details Folio Dr Cr

2. Errors of commission
This arises when a transaction is recorded in the wrong personal account. It occurs when a
transaction is recorded in wrong account but to the correct type of account.
Example: $400 paid to P. Collins by cheque was recorded in the account of J. Collins.

Date Details Folio Dr Cr

3. Errors of original entry


A wrong amount is entered in a book of original entry and this figure is then used for posting to
the ledger. This occurs where the wrong amount is posted to both accounts although the accounts
to which entries were made are correct. It arises when there is an error in amount in the source
document before posting to the ledger.
Example: Goods returned from P. Wedge $639 was recorded in both accounts as $369.
Date Details Folio Dr Cr

4. Errors of principle
An item is entered in a completely wrong class of account.
Example: A machine purchased for $10 000 cash has been debited to purchases account.

Date Details Folio Dr Cr

5. Compensating errors
These are two or more errors which cancel themselves out. Errors on one side of the ledger are
compensated by errors of the same amount on the other side.
Example: The sales and purchases account are both understated by $ 1 000.
Date Details Folio Dr Cr

6. Errors of complete reversal


In this case the debit account is credited and the credit account is debited with correct amount.
The correction of this error requires the figure to be doubled. (One to correct error and one for
original entry).
Example: Rent paid $300 by cheque wrongly recorded as rent received (credited to rent account
and debited the bank account).
Date Details Folio Dr Cr

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