Errors Flashcards
What are the 5 types of errors?
Transposition errors. Omission errors. Principle errors. Commission errors. Compensating errors.
What is a transposition error?
When two digits in an amount are accidentally recorded the wrong way around (£270 recorded as £720).
What is an error of omission?
When a transaction is completely omitted.
What is an error of principle?
An error that breaks the rules of an accounting principle or convention (a motor vehicle repair being recorded in the NCA account rather than an expense).
What is an error of commission?
When an error is made in the ledger accounts (when something is debited instead of being credited).
What is a compensating error?
When two errors equal each other out.
What is a suspense account?
A temporary account that allows a transaction to be recorded in the accounting system, even though the ledger account for one side of the transaction is not yet confirmed.
