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Title: Errors & Correction Of Errors
Description: All Errors That Affect Trial Balance Etc..
Description: All Errors That Affect Trial Balance Etc..
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UNIVERSITY OF THE WEST
MONA CAMPUS
Financial Accounting – ACCT 1005(MS15D)
ERRORS & CORRECTION OF ERRORS
The trial balance is merely superficial evidence of the arithmetical accuracy of postings of transactions, as
there are certain classes of mistakes, which do not affect the balancing of the trial balance
...
Errors Not Affecting the Balancing of the Trial Balance
1
...
E
...
purchased a motor
car on account from Used Wheels Ltd
...
2
...
g
...
Marks for $23,000 but debited the account of D
...
Error of Principle
This is where a transaction is entered in the wrong class of accounts e
...
bought a computer for
$54,000 for use in the business and debited purchases and credited the bank account
...
Error of Original Entry
This is where the figure taken from the source document is incorrect and entered in all accounts
affected by the transaction as such
...
g
...
Greaves for $5,640 and entered the
amount as $4,640
...
Compensating Errors
These are errors, which cancel or balance each other
...
g
...
Or
Where both accounts are carrying the same type of balance i
...
Dr or Cr
...
E
...
Electricity Expense overstated by $500
and Rent Expense understated by $500
...
e
...
E
...
Paid cash of $13,000 to A
...
Sherman
...
Every effort should be made to clear this difference, by way of correcting the
errors, especially where the amount is material
...
If the sum of the debit balances is greater than the sum of the credit balances, then the suspense account
is opened with a credit balance
...
This balance will then be eliminated upon location of the error(s)
...
The errors relating to the suspense account will need only a single entry
i
...
a debit or credit in one account and the corresponding debit or credit in the suspense account
...
A debit balance will be added to an expense and a credit balance to
an income account
...
Posting Incorrectly
Single-Sided (One-Sided) Error/Incomplete Double Entry
This is where the double entry is not completed e
...
lodged cash of $42,000 into the current account
of the business but only debited the bank account
...
g
...
2
...
g
...
Transposition Error
This is where the same digits are used but in the wrong order in one account e
...
paid utilities
expense of $2,650 but debited Utility Expense $2,650 and credited Cash $6,250
...
2
Title: Errors & Correction Of Errors
Description: All Errors That Affect Trial Balance Etc..
Description: All Errors That Affect Trial Balance Etc..