Week 14 Correction of Errors Flashcards
What are Errors of Omission?
When a bookkeeping entry has been compeltely ommited from the accounting records.
What are errors of commission?
When an item is entered to the correct type of account but the wrong acount.
E.g. £3000 Rent expense is debited to the Electricity Account
What are Errors of Principle?
When the bookkeeping entry is made to the wrong type of account.
For example, if a £1000 sale is credited to the sundry expenses account instead of the sales account.
What is a Compensating error?
When two or more errors cancel each other out.
For example, if the fixed assets account is incorrectly totalled and understated by 600, and the rent account is incorrectly totalled and overstated by 600.
What is an Error of Original Entry?
When an incorrect amount is posted to the correct account.
What is the error complete reversal of entries?
When the correct amount is posted to the correct accounts but the debits and credits have been reveresed.
What is a suspense account?
A temporary account and thefore never appears in teh finanal accounts.
What is the main reason to have a suspsense account?
To account ofr a debit or credit entry when the accountant is unsure as to where it should go
To make a preliminary trial balance when an error has been detected.
What are the steps to clear a suspense account?
Determine the original accounting entry which was made.
Decide what entry should have been made
Make the required adjustment.
