Error of Transposition

What Is Transposition Error? Transposition error is an error occurs by the reversal of digits such as recording 87 for 78, or 420 for 402. A slide is the entry of a number with an incorrectly placed decimal points, such as recording 2,170 for 21,700, or 4,500 for 450. How to Locate and Rectify Transposition … Read more

Rectification of Errors

Rectification of Errors: Definition In accounting, errors are the mistakes that the bookkeeper or accountant makes. These mistakes may occur in any of the following situations, among others: Classifying accounts Writing subsidiary books Posting entries to ledger accounts Casting totals Balancing accounts Carrying balances forward The process of finding and correcting mistakes of this kind … Read more

Classification of Errors in Accounting

Accounting errors are classified broadly into two groups: those that affect the agreement of a trial balance and those that don’t. Errors Leaving the Trial Balance Unaffected A trial balance will not be affected if the total of all debit entries in the ledger is equal to the total of all credit entries. Therefore, if, … Read more

Errors of Omission

Errors of Omission: Definition When some transactions are completely omitted from the books of accounts or entered but not posted, they are treated as errors of omission. If a transaction is omitted altogether from the books of accounts, there would be neither a debit nor a credit entry in the ledger. Hence, the trial balance … Read more

Errors of Commission

Errors of Commission: Definition Errors of commission occur due to the negligence of the accountant or clerk. For this reason, they are often referred to as clerical errors or errors of inadvertence. Let’s consider a few examples to show how errors of commission are caused: Entering the wrong amount in the correct subsidiary book Posting … Read more

Errors of Principle

Errors of Principle: Definition Errors of principle arise due to a bookkeeper’s or an accountant’s improper understanding of accounting and its core principles. These errors resemble errors of commission except in one respect: errors of commission usually lead to oversight whereas errors of principle are caused by a lack of knowledge of accounting principles. The … Read more

Errors in Original Entry

Explanation If a transaction is recorded in the subsidiary book with the incorrect amount, both the debit and credit entries made subsequently in the ledger will be incorrect despite being equal in terms of figures. Of course, this will not affect the trial balance. Effect on Accounts The effect on accounts will be either one … Read more

Complete Reversal of Entries

Explanation If a recorded transaction shows that both accounts have the correct debits and credits, the debit and credit entries in the ledger align and the trial balance remains unaffected. Effect on Accounts The debited account is credited and the credited account is debited. Rectification Entry The correct entry should have twice the amount to … Read more

Errors Not Affecting Trial Balance

Errors not affecting trial balance can take several forms. For example, a transaction may be entered in the subsidiary book at the wrong amount (i.e., error in original entry) and later debited or credited to the wrong account in the ledger (i.e., error of commission). As another example, an item of capital expenditure may be … Read more

Compensating Errors

Compensating Errors: Definition When an already-committed error is offset by another error (or set of errors), the latter error is known as a compensating error. Compensating errors occur when errors in equal amount but opposite in sense cancel each other. Explanation When errors have been compensated, the trial balance is in agreement. The result is … Read more