Correction of Errors
When compiling a trial balance errors can be made.
These are the errors that will be not be revealed by trial balance (CROPOC):
These are errors that will be revealed by trial balance:
Transposition error :
Where, for example, one entry has been
posted as £54 and another incorrectly posted
as £45
Addition error:
Mistakes in the calculating of the trial
balance itself or in the general ledger
Posting error:
Where one side of the transaction is not
posted
Unequal posting error:
Where the debit side doesn’t equal the credit
side
If the trial balance doesn’t balance, the errors are identified and corrected and the difference
may be entered into a suspense account to temporarily enable the trial balance to agree.
Errors:
Error of commission-
This is where the transaction is entered into
the wrong persons account. For example the
amount should have been entered in S.Khans
account but is entered into A.Khans account
Error of reversal entry-
This error occurs when debit and credit
entries have been made in the accounts but
on the wrong side. For example a cash sale
entered wrongly as debit sales account and
credit cash account. When it’s meant to be
debit cash account and credit the sales
account
Error of omission-
When the amount has completely been
omitted from the accounting book
Error of principle-
This is when the transaction has been
entered into the wrong type of account. For
example petrol used for the vehicles being
entered in the motor vehicles account when
it’s an expense and should be entered in the
motor vehicles expense account
Error of original entry-
This is when the correct accounts have been
used and the side in which it son is right but
the actual figure is wrong for example £45
being entered as £54.
Compensating error
This is when the two errors cancel each
other out