Chapter 3 Flashcards
Errors detected by the trial balance
- Single Entry
- Casting Error
- Transposition Error
- Extraction Error
- Omission Error
- Two entries on one side
Errors NOT detected by the trial balance
- Error of original entry
- A compensating error
- An error of omission
- An error of commission
- An error of principal
Single entry error
Only one side of a double entry has been made
Casting error
A list has been incorrectly totalleed or a ledger balance has been added incorrectly
Transposition Error
If an amount has been accidentally transposed (numbers have switched positions) e.g 87 not 78
Extraction Error
If a ledger account is incorrectly recorded on the trial balance either by recording the wrong figure or putting the balance on the wrong side of the trial balance
Omission Error
if a ledger account balance is omitted from the trial balance
Two entries on one side
If a transaction is entered as two debits or two credits
Error of original entry
The wrong figure is entered as both debit and credit. Eg £300 not £330 in both debit and credit.
Compensating error
2 separate errors are made - one on debit and one on credit and by coincidence the 2 errors are for the same amount and cancel each other.
Error of omission
An entire double entry (both debit and credit) is omitted fro the ledge account balance.
Error of comission
A debit entry and equal credit entry have been made but one of the entries has been to the wrong account e.g Credit entry to ELECTRICITY account instead of RENT account
Error of principle
A debit entry and equal credit entry have been made but one of the entries has been to the wrong TYPE of account e.g Motor vehicle not Motor Expense
Main difference between error of commission and principle
Commission - wrong account
Principle - wrong TYPE of account
Process for correction of errors
1) What has been done?
2) What should have been done?
3) What needs to be done to correct it?
