ERROR

ERROR

An error is a mistake made in the book keeping entries, balancing of accounts or extraction of trail balance. There are two types of errors

(2)  Errors that do not affect the trial balance

(3)  Errors that affect the trial balance

Errors not Affecting the Trial Balance

1. Error of Omission: This is a case where a transaction is completely omitted from the books.
2. Errors of commission: This occurs when the correct amount is entered in the right class of account but in the wrong account. E.g. a purchase from C. Aba was wrongly credited to C. Aba.
3. Error of Original Entry: This occurs when the double entry is obeyed but with wrong amount. E.g. a sale of N10,000 was recorded as N100,000 in the correct accounts.
4. Error of Principle: in this case the right amount was used but in wrong class of account. E.g. the purchase of a car was debited to motor expenses accounts
5. Compensating errors: This occurs when an error in one account is cancelled out by another error in another account e.g. sales account is over cost by N20 and purchase account is over cost by exactly N20.
6. Complete reversal entry error: This error occurs when the double entry required for a transaction is completely reversed. E.g. When the payment of cash to a supplier is recorded as a receipt of money from the supply.
7. Error of Transposition: This occurs where the wrong sequence of the individual characters in the number were used for the double entry records. E.g. 1243 written as 1423. however, where this occurs on only one side, the trial balance will not balance.

Errors Affecting the Trial Balance

Many other errors affect the trial balance. These include casting errors (under casting or over casting). Posting only one side of the ledger for a transaction, error of transposition occurring on only one side of the ledger, over / understatement of opening or closing balance etc.

Correction of errors not affecting the trial balance

Once these errors are discovered, entries are made in the ledger accounts involved based on double entry principles in order to correct the errors.

Illustration

Show the journal entry needed to correct the following errors:

1. A credit sale of N590 to E. Gemade has been completely omitted from the book.
2. Credit purchase of N440 from C. Gbaje was erroneously entered in C. Baje’s account.

iii.        The purchase of a machine which is to be used by the firm was debited to purchases account N20,000.

200. In the cash book, the amount of cash sales transferred to the sales account was overstated by N200 and the amount transferred to wages account was over stated by N200.
201. A sale of N380 to A. Shade was recorded as N280 in the books.
202. A cheque of N1600 paid to M. Dike was mistakenly debited to cashbook and credited to M. Dike’s account.

vii.      A credit purchase from P Mailafia N5,600 was entered in the books as N6,500.