Understand Bookkeeping International

Question 1

Errors of transposition

Answer 1

• Where two adjacent figures in an amount are reversed.
  eg where 243 is recorded as 423. (Note that the difference between such amounts is always divisible by 9: 423 - 243 = 180).

Question 2

Errors of omission

Answer 2

• Where an entry or part of an entry has been left out.

eg An invoice is recorded in the Payables account, but not the appropriate expense account, or an invoice has been left out altogether.

Question 3

Errors of principle

Answer 3

• Where some fundamental accounting principle has been contravened, often the wrong class of account has been used.

eg A purchase invoice received has been recorded in Receivables instead of Payables, or the Bank account has been debited with a payment instead of credited.

Question 3

Errors of commission

Answer 3

• Where the correct amount is entered in the wrong account, but it is the right class of account.

An invoice for petrol has been posted to Heat & light instead of Motor expenses (both expense accounts). (An error of principle would occur if the posting was to the motor asset account instead of the expense account.)

Question 4

Errors can combine in such a way that they are:

Answer 4

Compensating errors

• Here, by coincidence, errors are equal and opposite and the effect of one cancels out the effect of the other.

eg An invoice for 230 included as 320; and An invoice for 870 included as 780. Totals correct 1,100.