Errors Not Affecting Trial Balance Agreement

1
Chapter 26

• Errors Not Affecting Trial Balance Agreement

2
Error of omission

• A transaction is completely omitted from the books

3
Error of omission

• Example
• Office furniture had been purchased for 3,600
  on credit from Kowloon Co. . This transaction had
  not been recorded. The bookkeeper found this
  error on Apr 11, 1996.

4
No effect
FA understated CL understated
Dr Office Furniture Cr Kowloon Co.
5
Journal
11/4
Office Furniture
3,600
Kowloon Co.
3,600
Being office furniture purchased from Kowloon
Co. not recorded
6
Error of commission

• A transaction is entered in a wrong account of
  the same class

7
Error of commission

• Example
• Goods 20,000 sold on credit to Mr. Chan had
  been entered in the account of Mr. Chen. The
  bookkeeper found this error on May 1, 1996.

8
No effect
No effect
Dr Mr. Chan Cr Mr. Chen
9
Journal
1/5
Mr. Chan
20,000
Mr. Chen
20,000
Being goods sold to Mr. Chan entered in the
account of Mr. Chen
10
Error of principle

• A transaction is entered in an account of wrong
  class

11
Error of principle

• Example
• The payment of an invoice 36,000 in respect
  of repairing the motor vehicle as to prolong the
  life of that motor vehicle had been debited to
  the repairs expenses account. The bookkeeper
  found this error on Jul 26, 1996.

12
Understated
FA understated
Dr Motor Vehicle Cr Repairs Expenses
13
Journal
26/7
Motor Vehicle
36,000
Repairs Expenses
36,000
Being cost of motor vehicle wrongly debited to
the repairs expenses account
14
Error of original entry

• Wrong amount is entered in the correct side of
  the account

15
Error of original entry

• Example
• Goods 890 sold on credit to Aberdeen Co. had
  been entered in the books as 980. The bookkeeper
  found this error on Jun 7, 1996.

16
Overstated
CA overstated
Dr Sales Cr Aberdeen Co.
17
Journal
7/6
Sales
90
Aberdeen Co.
90
Being goods 890 sold entered as 980
18
Error of duplication

• A transaction is entered twice in the books

19
Error of duplication

• Example
• Cheque 3,000 received from Kwun Tong Co. had
  been entered twice in the cash book. The
  bookkeeper found this error on Aug 18, 1996.

20
No effect
No effect
Dr Kwun Tong Co. Cr Cash at Bank
21
Journal
18/8
Kwun Tong Co.
3,000
Cash at Bank
3,000
Being cheque received from Kwun Tong Co. entered
twice in the Cash Book
22
Compensating error

• One error cancels the effect of another error
  coincidently

23
Compensating error

• Example
• The telephone account was overstated by 100
  while the sales account was overstated by 100,
  too. The bookkeeper found this error on Sep 16,
  1996.

24
No effect
No effect
Dr Sales Cr Telephone Expenses
25
Journal
16/9
Sales
100
Telephone Expenses
100
Being telephone account and sales account both
overstated by 100
26
Reversal of entries

• Double entry has been made, correct in amount but
  wrongly posted on the reversed sides of the
  accounts

27
Reversal of entries

• Example
• Goods purchased for cash 2,600 had been
  entered in the debit side of the cash in hand
  account and posted to the credit side of the
  purchases account. The bookkeeper found this
  error on Nov 11, 1996.

28
Overstated
CA overstated
Dr Purchases Cr Cash in Hand
29
Journal
11/11
Purchases
5,200
Cash in Hand
5,200
Being purchases entered in the wrong sides of
both accounts