15 - Correction of errors

Question 1

what is a trial balance

Answer 1

a list of all the debit and credit balances on each of the nominal ledger accounts

when totalled, sum of debit column = sum of credit column
when this doesn’t happen, an error has occurred

Question 2

what two types of errors occur

Answer 2

1. errors which still allow the trial balance to balance
2. errors which cause an imbalance in the trial balance

Question 3

list all of the errors that still allow the trial balance to balance

Answer 3

1. error of omission
2. error of original entry
3. reversal of entries
4. error of principle
5. error of commission

Question 4

list all of the errors that mean the trial balance won’t balance if total debits don’t equal credits

Answer 4

1. unequal amounts error
2. single entry error
3. two debits or two credits
4. balance transfer error

Question 5

what is an error of omission

Answer 5

both sides of transaction completely left out

eg £500 rent not recorded in nominal ledger

Question 6

what is an error of original entry

Answer 6

entry has been made so debits = credits but amounts are incorrect

Question 7

what is a reversal of entries

Answer 7

transaction recorded at correct amount but debit/credit reversed

Question 8

what is an error of principle

Answer 8

debits = credits but one entry made to wrong type of account

Question 9

what is an error of commission

Answer 9

debits = credits but one entry made to wrong account, but not wrong type of account

Question 10

what is an unequal amounts error

Answer 10

transposition error where numbers have been reversed and or are wrong

Question 11

what is a single entry error

Answer 11

debit entry posted with no corresponding credit made or vice versa

Question 12

what is a two debits/credits error

Answer 12

two entries into either debit/credit have been made

Question 13

what is a balance transfer error

Answer 13

final balance on nominal ledger account is incorrectly transferred to trial balance

debits dont equal credits so trial balance wont balance

Question 14

what is a suspense account

Answer 14

a temporary account, so never shows in final accounts

Question 15

what is a suspense account used for

Answer 15

1. to account for a debit/credit entry when accountant is unsure as to where it goes
2. to make a preliminary trial balance balance when an error has been detected

Question 16

steps to clear a suspense account

Answer 16

1. determine the original accounting entry which was made
2. decide what entry should have been made
3. make the required adjustment