ERRORS NOT AFFECTING TRIAL

BALANCE AGREEMENT
The balancing of a trial balance does not always imply that the double-entry is error-free.
There are seven errors, which when committed, the trial balance still agrees. They are as follows:

1. Error of omission
This occurs when entry is missed out (omitted) completely from ledgers. Neither a debit entry
nor a credit entry has been made.
Examples
 Payment of rent of $30 in cash was completely omitted from the books
 A sales invoice of $25 to Thomas was overlooked

How to correct
 Apply fresh double-entry

2. Error of commission
This occurs when a transaction is entered using the correct amount and on the correct side of a
wrong account, but which is of the right class.
Examples
 Payment of rates $50 in cash was recorded in the rent account
 The purchase of a computer $200 by cheque was entered in the machinery account

How to correct
 Close the wrong account and enter in the correct one by debiting if it was wrongly
credited or vice versa

3. Error of principle
It occurs when a transaction is entered using the correct amount and on the correct side, but
both in the wrong account and wrong class of account.
Examples
 The purchase of a motor van for $2000 was entered in the motor expenses account
 The sale of office equipment for $90 was credited to the sales account

How to correct
 Close the wrong account and enter in the correct one by debiting if it was wrongly
credited or vice versa

4. Error of original entry

This refers to a situation whereby a wrong figure is recorded in the books of original entry,
resulting in the recording of the wrong figure, both on the debit and credit sides of the
concerned accounts.
Examples
 Cash sales of $400 were recorded in the books at $40

1 Compiled by T T Herbert (0773 038 651 / 0712 560 772 / 0734 521 688)
  The purchase of a computer in cash $180 was entered both in the computer and cash
account as $18

How to correct
 First ascertain whether the error committed was an overcast or undercast
 If it is an undercast, maintain the correct double-entry system and enter the difference
 If it is an overcast, reverse the double-entry system and then enter the difference

5. Compensating error
These are simply errors which cancel out each other. In other words, these are two or more
errors where the net effect is zero. This can be done by either overstating or understating two
different accounts (found on the opposite sides of the trial balance) with the same amount. This
can also occur when accounting for two items (found on the same side of the trial balance), one
of them is overstated while the other is understated with the same amount.
Examples
 The telephone charges account and the creditors were undercast by $40
 Both commission received and rent were overcast by $69
 Sales were overcast by $75 and discount received was undercast by the same amount

How to correct
 If both accounts were overstated, reverse the double entry and enter the difference
 If both accounts were understated, maintain the correct double-entry and enter the
difference
 If one account was overcast and the other was undercast, reverse the entry and enter
the difference for the account overcast and maintain the correct double entry and enter
the difference for the account undercast

6. Complete reversal of entries

This occurs when the correct double-entry system of a particular transaction is reversed, by
debiting the account that was supposed to be credited and vice versa.
Examples
 Cash withdrawn from the bank for business use $50 was debited to the bank account
and credited to the cash account
 A sales invoice of $10 to Brian was debited to the sales account and credited to Brian’s
account

How to correct
 Double the amount and apply correct double-entry

7. Transposition error
This is whereby a wrong figure is entered in the books by changing the sequence of numbers
though the correct double-entry will have been observed.
Examples
 A sale of goods $515 to Gracious had been recorded in the books as $551
 Payment of electricity $212 by cheque had been entered in the books as $221

How to correct

2 Compiled by T T Herbert (0773 038 651 / 0712 560 772 / 0734 521 688)
  First ascertain whether the error committed was an overcast or undercast
 If it is an undercast, maintain the correct double-entry system and enter the difference
 If it is an overcast, reverse the double-entry system and the enter the difference

EXAM TYPE QUESTIONS

Question 1
Show the journal entries necessary to correct the following errors:

a) Purchase of goods $420 from Better suppliers was entered in Betta suppliers’ account.
b) A credit note for $70 received from Tee Vee suppliers was overlooked.
c) A sale of $300 to B Moyo was debited to B Mayo’s account.
d) A private purchase of goods $150 was recorded in the purchases account.
e) The sale of a second hand computer for $80 was entered in the sales account.
f) Rent received $59 had been recorded in the sales account.
g) Cash $50 taken for own use had been credited to the bank account.
h) The rates and the discount received account were both overcast by $98.
i) Goods worth $240 taken for own use were debited to the purchases account and credited to the
drawings account.
j) Cash sales of $800 were entered in the books as $80.

Question 2
Show the journal entries necessary to correct the following errors:

a) Payment of rent $40 by cheque had been recorded in the cash account.
b) The purchase of a motor van for $3800 had been entered in the motor expenses account.
c) A purchase of goods $889 from CB Ltd had been recorded in the books as $898.
d) Commission paid $140 had been entered on the debit side of commission received account.
e) Cash received from Pretty $380 had been debited to Pretty’s account and credited to cash
account.
f) Purchases returns of $12 had been credited to the sales returns account.
g) Cash banked $95 had been debited to the cash account and credited to the bank account.
h) The payment of wages and salaries $450 was completely omitted from the books.
i) A purchase of fittings $320 has been entered in the purchases account.
j) Returns from B Ball $50 had been entered in B Bull’s account.

Question 3
Show the journal entries necessary to correct the following errors:

a) Carriage inwards $30 were entered in the carriage outwards account.

b) A purchase invoice of $487 from Yolanda has been recorded in the books as $847.
c) Cash sales $350 had been omitted.
d) The purchase of fixtures $720 was entered in the fittings account.
e) The sales figure was overcast by $84 whereas the capital was undercast by the same amount.

3 Compiled by T T Herbert (0773 038 651 / 0712 560 772 / 0734 521 688)
f) A private electricity payment $30 was debited to the bank account and credited to the drawings
account.
g) The purchase of a motor van $580 was written off to the motor repairs account.
h) A payment of $90 for telephone charges was recorded both in the bank account and telephone
charges as $9.
i) Cash withdrawn from the bank for business use $39 was debited to the bank account and
credited to the cash account.

4 Compiled by T T Herbert (0773 038 651 / 0712 560 772 / 0734 521 688)