This article discussed the different type of errors which do not affect the agreement of the Trial Balance.
When these type of errors are discovered, their correction is journalized in the General Journal to be posted to their respective ledgers.
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Errors Of Omission |
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Occurs when a transaction is being COMPLETELY OMITTED from the books Example: A cash receipt of $500.00 from a trade debtor, Mr.ABC has been omitted from the books The correcting entry should be: Debit: Bank $500.00 Credit: Mr ABC $500.00 Being omission of aforesaid entry now adjusted |
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Errors Of Commission |
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An entry has been posted to the correct side of the Ledger but to the wrong account. Example: Billing to Mr. A of $500.00 was wrongly posted to Mr B’s a/c [ both are trade debtors in the books of account] Debit: Mr. A $500.00 Credit: Mr. B $500.00 Being correction of error, sales to Mr. A wrongly debited to Mr. B’s account. |
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Errors Of Principle |
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A transaction which is incorrectly dealt with like should be taken up into expenses a/c (income statement) but now wrongly taken up into the balance sheet a/c Example: Office maintenance of $1,000.00 wrongly posted into Machinery a/c Debit: Office maintenance a/c $1,000.00 Credit: Machinery a/c $1,000.00 Being correction of error, revenue expenditure being treated incorrectly as capital expenditure |
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Compensating Errors |
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An error on the debit side being compensated by an error of equal amount on the credit side. Example: Purchases a/c was overcast by $1,000.00 and so is Sales a/c Debit: Sales A/c $1,000.000 Credit: Purchases a/c $1,000.00 Being correction of overcasts of $1,000 each in the Sales a/c and Purchases a/c which compensated for each other. |
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Errors Of Original Entry |
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A wrong amount is recorded in the subsidiary book and posted to the accounts Example: A sales to Mr. A $560.00 was entered in the books as $650.00 Debit: Sales $90.00 Credit: Mr. A’s a/c $90.00 Being correction of error, sales overstated by $90.00 |
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Complete Reversal Of Entry |
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This is where the correct accounts are used but each item is shown on the wrong side of the account. Example: Payment of $100.00 to trade creditor Mr. X was entered on the debit side of the Cash book in error and credited to Mr. X’s a/c This type of error requires an adjustment to cancel the error and the actual entry itself. Normally, this is done by one journal adjustment by doubling the actual amount first recorded. Debit: Mr X’s a/c $100.00 x 2 = $200.00 Credit: Bank a/c $200.00 Being correction of error, payment of cash to Mr. X $100.00 debited to cash and credited to Mr. X incorrectly. |