6 errors and correlations to accounting records and financial statements Flashcards
adjustments for a sales return
dr sales return
cr trade receivables
adjustments for a purchase return
dr trade payables
cr purchase returns (or purchases)
adjustments for a contra
dr trade payables
cr trade recievables
adjustments for a irrecoverable debt
dr irrecoverable debt expense
cr trade recievable
adjustments for a refund to customers
dr trade receivable
cr cash
adjustments for a refund to suppliers
dr cash
cr trade payable
adjustment for a dishonoured cheque
dr trade receivable
cr cash
contra
customer who is also a supplier and hence the business owes money to, and is owed money from, the same entity
explain the steps for the following situ:
a credit sale is made to customer for £100
the customer pays for goods
customer returns goods
leaving a ……. in …… of …..
then refund the customer 100
dr trade recievables 100
cr sales 100
dr cash 100
cr trade recievables 100
dr sales returns 100
cr trade recievables 100
dr trade recievables 100
cr cash 100
leaving net credit in tr of 100
dr trade recievables 100
cr cash 100
what are the five types of errors in accounting
CEETO
Transposition errors when two digits are accidentally recorded the wrong way around
Omission errors failing to record a transaction at all
Errors of principle an accounting entry that breaks the “rules” of an accounting principle or
concept, eg incorrectly classifying capital vs revenue expenditure
Errors of commission an accounting entry into the wrong account but of the correct nature, eg
recording a telephone expense as an electricity expense
Compensating errors errors which are, coincidentally, equal and opposite to each other
what is the 3 part system for correcting journals
did, should have, correcting journal
