Errors and suspense

Question 1

Errors Not Affecting Trial Balance:

Answer 1

Error of Commission: Incorrectly recording a transaction in the wrong personal account, but the amounts are correct

Error of Omission: Failing to record a transaction entirely, resulting in no debit or credit recorded

Error of Principle: Using the wrong type of account (e.g., debiting an expense instead of an asset)

Error of Compensating: Two errors offsetting each other, keeping the trial balance intact

Error of Reversal: Reversing the debit and credit entries
Error of Original Entry: Recording an incorrect amount in both account

Error of Casting: Mistakes in totaling amounts, leading to incorrect entries
Error of Transposition: Digits in an amount being switched (e.g., recording
760

Question 2

C.O.P. C.R.O.P.

Answer 2

C: Error of Commission
O: Error of Omission
P: Error of Principle
C: Error of Compensating
R: Error of Reversal
O: Error of Original Entry
P: Error of Casting
T: Error of Transposition

Question 3

Correction Process: Errors not affecting the trial balance are corrected through

Answer 3

double entries, specifically journal entries

Question 4

Three Questions for Correction:

Answer 4

What should have been done?
What has been done?
What is the correction

Question 5

Example of Correction:

Answer 5

If goods worth $1,000 were incorrectly debited to the account of Ali Salman instead of Ali Saleem, the correcting entry would involve crediting Ali Salman’s account and debiting Ali Saleem’s account

Question 6

A suspense account

Answer 6

is used temporarily to record discrepancies until the correct account is determined. However, errors not affecting the trial balance do not involve suspense accounts

Question 7

Importance of correction/suspense

Answer 7

Understanding and correcting these errors is crucial for maintaining accurate financial records and ensuring that the trial balance remains correct

Question 8

Errors Affecting Trial Balance

Answer 8

Partial omission: Incomplete double entry (missing debit or credit).
Partial reversal: Double entry made on the same side of each account (both debited or both credited).
Error of transposition/partial transposition: Different amounts posted in each account.
Overstatement/Understatement of an account: An account is recorded with an incorrect amount.

Question 9

Errors Within the Trial Balance Itself

Answer 9

Posting an account with the wrong amount.
Posting an account to the wrong side.
Omitting an account balance.

Question 10

When a trial balance is imbalanced

Answer 10

, a suspense account is used as a temporary balancing figure. It helps identify and correct errors affecting the trial balance. Errors are corrected using double-entry bookkeeping, involving the suspense account to maintain balance. Errors occurring within the trial balance itself are corrected with a single entry, also involving the suspense account.