Correction of Errors

While recording transactions, whether manually or using a computer system, errors may arise.
Such errors need to be corrected. However, in accounting, errors are not corrected using erasers
or correction fluids but rather by making other accounting entries that would set off those errors
and at the same time show a correct financial state of the business.

Errors are of 2 main types:

1. Errors not affecting trial balance: The trial balance still agrees though there are
errors. In other words, these are errors not revealed by the trial balance.
2. Errors affecting trial balance: The trial balance does not agree because there are
errors. In other words, these are errors revealed by the trial balance.

Errors not affecting trial balance are listed as follows:

 Error of omission
 Error of commission
 Error of principle
 Error of original entry
 Complete reversal of entries
 Compensating errors
 Error of duplication

Summary of Accounting Error Types

Accounting Errors Description

Error of Principle in Accounting
Errors of Omission in Accounting
Error of Commission
Compensating Error
Error of Original Entry
Complete Reversal of Entries
Correct amount, wrong type of account
Entry missed from accounting records
Correct amount and type of account but wrong account
Two or more errors balance each other out
Correct accounts, wrong amounts
Correct amount and account, entries reversed

The following are errors affecting trial balance:

In subsidiary books:
i. Error in total
In ledger:
ii. Omission of one entry
iii. Posting to the wrong side of the ledger for one entry
iv. Enter in amount for one entry
 v. Error in calculation
In trial balance:
vi. Error in amount
vii. Omission of a balance

Correcting errors:

Correcting errors are normal accounting tasks and are carried out using the double entry system.

The basic steps to follow are:

Step 1: Identify the transaction and state the entries that should have been made.
Step 2: State the entries actually made
Step 3: State the entries to be made to cancel wrong entries
Step 4: State the entries to complete missing entries
Step 5: Complete double entry through suspense account, if needed
Step 6: Combine entries in steps 3, 4 and 5
Errors not affecting trial balance:
For these errors, at least 2 accounts are affected. Combined, total of debit entries should be equal
to total of credit entries.
Errors affecting trial balance:
These errors are corrected through the suspense account.
Suspense Account:
The suspense account is a temporary account opened when the trial balance does not agree. Its
balance represents the difference between the Dr total and the Cr total of the trial balance.
If the Dr total of the trial balance is greater than the Cr total, then the suspense account will have
a Dr balance and vice versa.
After all errors have been corrected, the suspense account will no longer have a balance.

Provide the journal to correct each of the following errors:

(1)A cash sale of $100 was not recorded.

(2)Rates expense of $500, paid in cash has been debited to the rent account in error.

(3)A non-current asset purchase of $1,000 on credit has been debited to the repairs expense
account rather than an asset account.

(4)A rent bill of $1,200 paid in cash has been debited to the rent account as $1,400 and a casting
error on the sales account has resulted in sales being overstated by $200.

(5)A cash sale of $76 has been recorded as $67.

(6)A cash sale of $200 has been debited to sales and credited to cash.
Correction of errors
Errors
Errors NOT affecting trial
balance agreement (six)
 Errors of commission
 Errors of principle
 Errors of original entry
 Errors of omission
 Compensating errors
 Complete reversal of
entries
Correction by DOUBLE ENTRY
Step 1 Show corrections using
journal entries
Step 2 Post journal entries to
relevant ledger
accounts
Errors AFFECTING trial balance
agreement
The following are EXAMPLES
ONLY:
 Incorrect calculations in
any account
 Making an entry on only
one account, i.e. a debit
but no credit OR a credit
but no debit.
 Entering a different
amount on the debit side
from the amount on the
credit side, or vice versa.
 … many other errors…
Suspense account
Enter the difference in the trial
balance in the suspense account
Correction by DOUBLE ENTRY
Step 1 Show corrections using
journal entries
Step 2 Post journal entries to
suspense account
AND/OR relevant
ledger accounts