Error of Correction

This chapter consists of three major things :

1. Journal (To correct the mistakes)
2. Suspense Account (If this account is balance, that correction is almost correct)
3. Statement Of Corrected Net Profit (After discovering mistakes, we need to prepare
a statement to correct the previous net profit)

Types of Error
● Not Affecting Trial Balance
● Affecting Trial Balance

(A) Error NOT affecting Trial Balance

(a) Error Of Omission 遗漏（忘记做记录）
(i) Credit Sales to Rong Qi RM2,000 was completely omitted from the
books.
Journal :

(b) Error Of Commission 同类/人名错误 **(对的加回去，错的反方向扣除)

(i) Payment of General Expenses by cash RM50 was debited to the
Motor Expenses account.
Journal :

(ii) Purchases on credit from NG was credited to MG’s account.

Journal :

(c) Error Of Principle 原则性错误（不同类/不同边）

● Payment of motor expenses by cash was debited to Motor Van
Account.
Journal :
 (d) Error Of Original Entry (之前记录的时候，数字写错)
***钱多了，原journal倒反 ➖掉，钱少了原journal➕回去即可
● Cash Sales RM2,000 was recorded as RM200.
Journal :

(e) Reversal Error 颠倒性错误 ***原journal，数字 ✖️2即可

● Cash Sales RM 200 was debited to Sales Account and credited to
Cash Account.
Journal：

(f) Compensating Error 抵消性错误(不同类/不同边) ***一个acc的dr和另外一个acc的cr同时多记或者少记

● Sales account and Rental account were overcast by RM 100.

Journal :

● Purchases account and capital account were undercast by RM200

Journal :
(B) Error affecting trial balance (单方面错误) ****出现suspense account (暂记)
(a) Error in Calculation
(i) Sales account was undercast by RM100.
Journal :

(ii) Motor Van account was overcast by RM200.

Journal :

(b) Error In Amount 一边数字错 (单方面，一个acc的数字错误，另外一个正确)

(i) Cash Sales RM100 was recorded as RM10.
Journal :
How to differentiate Error in Calculation and Error in Amount ??
1. Error in Calculation keyword - undercast/overcast/overstate/understate
2. Error in Amount keyword - 两个acc，在记录的时候，一个是对的，另外一个是错的

(c) Error in Posting to the wrong side of an account ****数字 ✖️2

(i) Cash Dales RM100 was debited to both accounts.
Journal :

(d) Error of omission of single entry 一边遗漏

***journal有两边，dr和cr，忘记写其中一边
(i) Cash Sales RM100 was recorded in Cash account only.
Journal :

(e) Omission of account balance from Trial Balance / Incorrect listing on trial
balance.
(i) Purchases account RM1,000 was omitted from the trial balance.

Journal :

(ii) Sales account RM2,000 was recorded in the wrong side on Trial Balance

Journal :
 Not Affecting Trial Balance
Practice 1
During the end of the financial year(31 December 2020), Kai has discovered several errors from his books.

1. Payment received from rongqi, costing RM 700 has been wrongly recorded in rangqa’s account.
2. Commission Income, received by cash RM200, has been credited to the Rental Income account.
3. Yide didn’t record the cash sales to rongqi , RM3,000 on 30 December.
4. The discount allowed was wrongly recorded as RM300, the correct figure should be RM200.
5. Credit purchases from Jason RM2,500 was debited to Jason’s personal account and credited to purchases
ledger.
6. Rental and Commission Income were overstated by RM300.
7. Rental Income has been recorded as Rental expenses, RM890 ******
8. Credit sales to Fuji , RM3,000 has been recorded as RM300.

You are required to prepare :

(A) General Journal
(B) Purchases Ledger and Sales Ledger

Practice 2
Leo discovered these following errors on 30 June 2020.

(a) A sale of goods RM 678 to Mr. Xu had been entered in Mr. Yu’s account.
(b) The purchase of a machine on credit from Mr. Bai for RM 4,390 had been completely omitted.
(c) The purchase of a motor van RM 3,800 had been entered in error in the motor expenses account.
(d) A sale of RM 221 to Mr. Zhou had been entered in the books, both debit and credit, as RM 212.
(e) Commission received RM 257 had been entered in error in the sales accounts.
(f) A receipt of cash from Miss Pan RM 77 had been entered on the credit side of the cash book and the debit
side of Miss Pan’s account.
(g) A purchase of goods RM 189 had been entered in error on the debit side of the drawings account.

Please prepare general journal entries to correct these mistakes.

Practice 3

Show the journal entries for correcting the following in the books of LING:

(a) The purchase of a computer for RM 1,650 on credit from Jing Ltd. had been omitted from the books
(b) LING decided to write off as a bad debt an amount of RM 360 due from R Smith, a trade account
receivable.
(c) LING had taken goods, value RM 95 at cost, for his personal use but no entry had yet been made in the
books.
(d) The purchase of goods RM 217 on credit from HAN had been posted in error to the account of HAO
(e) The payment by cheque of an account for RM 375 for repairs to motor vehicles had been entered in the
cash book and posted to motor vehicles account
(f) Cash sales and rent expenses accounts were both understated by RM300
(g) Commission receipts of RM 400 had been entered as on the credit side of the cash book and the debit side
of the commission receipt’s account.
 Suspense account
● Suspense account 是一种 temporary account, 把 journal 和 different for trial
balance 代入后，balance的话就是对了。
Statement of Corrected Net Profit
● 一个类似Income Statement的报表，因为我们之前有费用，收入等没有记录到，或者记错，
所以需要准备这个来更正。
Example 1
- General Journal, Suspense Account and Statement of Corrected Net Profit.

Lock Enterprise extracted a trial balance as at 31 December 2005. He was unable to balance it, but as he
urgently needed his accounts for tax purposes, he opened a suspense account and entered RM 705 debit
balance in it.

The following year he found the errors now listed :

(a) The returns inwards day book had been undercast by RM 100.
(b) Drawings of RM 80 had been debited to wages account.
(c) Carriage inwards RM 75 had been debited to carriage outwards.
(d) A payment of bank charges RM 270 had not been posted to the expense account.
(e) A sale of goods RM 385 to K Abbott on 30 December 2005 had not been entered at all.
(f) Discount allowed of RM 218 had been credited to the discount allowed account.
(g) A rent rebate of RM 200 had been entered in the cash book but not posted elsewhere.
(h) The purchases day book had carried forward a figure of RM 24,798 when it should have been RM 24,897.

Required:
(1) Show the journal entries needed to correct the errors. Narratives are not required.
(2) Show the suspense account balance off.
(3) The original net profit was shown as RM 77,220 calculates the corrected figures for net profit after
the above items have been corrected.
Question 1
A book-keeper made the following errors in entering his accounts :

(a) A sum of RM 18 received from A. Brown was debited in the Cash Book and also debited to A. Brown’s account.
(b) The total of the discount received column in the Cash Book of RM 40 has not been posted.
(c) Goods of RM 100 purchased from Lee was posted to his account as RM10
(d) The Sales Returns Book had been undercast by RM 10 and the wrong amount posted.
(e) A purchase of goods from C. Dawn had been correctly entered in the Purchases Book as RM 65 but had been posted to
Dawn’s account as RM 5.

Show the entries, either in Journal form or by Ledger Accounts, which would be necessary to correct each of
these errors.

Question 2
Yide have extracted a trial balance and drawn up accounts for the year ended 31 December 2006. There was a
shortage of RM 292 on the credit side of the trial balance, a suspense account being opened for that amount.

During 2007 the following errors made in 2006 were located:

(i) RM 55 received from sales of old office equipment has been entered in the sales account.
(ii) Purchases day book had been overcast by RM 60.
(iii) A private purchase of RM 115 had been included in the business purchases.
(iv) Bank charges RM 38 entered in the cash book have not been posted to the bank charges account.
(v) A sale of goods to B Cross RM 690 was correctly entered in the sales book but entered in the personal
account as RM 960.

Required:
(a) Show the journal entries to correct the errors.
(b) Write up the suspense account showing the correction of the errors.
(c) The net profit originally calculated for 2006 was RM 11,370. Prepare a statement to correct it.
Question 3
The trial balance of E Samson and Sons at 31 December Year 5 did not balance. A suspense account was
created in order to achieve the balance. Later, examination of the books revealed that:

1. Discount allowed of RM 76 had been credited in error to the discount received account.
2. A sale of RM 151 to T Wisdomme had been posted correctly to the personal account but entered in error in the
sales day book as RM 115.
3. 3 A cheque received from Keen Blade Ltd, entered correctly in the cash book as RM 766, had been posted to the
ledger accounts as RM 760.
4. The purchase of new machinery for RM 1,200 had been posted to the Inventory account. (Depreciation is ignored
for the year in which machinery is purchased.)
5. A sale of RM 265 to C Johnson had not been posted to his account.
6. A petty cash balance of RM 100 had been omitted from the trial balance.
7. Bank interest charges of RM 720 were correctly entered in the cash book but the other side of the double entry
had been omitted.

Required:
A. Prepare journal entries, without narrations, to correct the above errors.
B. Prepare a suspense account.
C. The draft final accounts, prepared from the original trial balance, show the working capital to be RM16,217.
Prepare a statement showing the effect of the above corrections on this figure.

Question 4
John Laundau has just extracted a trial balance on 30 August, the end of his financial year. The debit side was
greater than the credit side by RM 520 and a suspense account was opened for that amount. The auditors
subsequently found the following errors:

1. RM 200 cash received from the sale of an old computer has been credited to the rent received account.
2. A payment of RM 100 for water entered in the cash book had not been entered in the water account.
3. The sales account had been undercast by RM 260.
4. A private purchase of a RM 1,000 computer had been included in the computer account.
5. Sale of goods to Lynne Beagle had been correctly entered in the sales account as RM 2,150 but had been entered
in the personal account as RM 2,510.
6. No provision against doubtful debts had been created. This should have been 3 per cent of the end of year total
account receivables of RM 7,000.

Required:
(a) Make appropriate journal entries, with narrative, to rectify the errors.
(b) Show how the suspense account would be cleared by the appropriate entries.
Question 5
(A){write down the error types 10%}
(B){show the journals 14%}
(C){show the suspense account 6%}

Please identify the error , show the suspense account and show the journals in the books of Ali, Ali closed his accounts on
30 Nov 2021. All the transactions are from the books from Ali on 30 Nov 2021.

(i) Cash sales RM1,850 was recorded in sales account and bank account as RM 1,800.
(ii) A purchase of goods RM 190,000 was posted to the debit side of Motor van account.
(iii) Credit Sales to B , RM 20,000 was wrongly entered to RM 21,200 at Sales account only and the transaction was wrongly
entered to account receivable-C.
(iv)The purchase of Motor Van was entered to Motor Van Expenses, it costs RM 100,000.
(v)Ali completely forgot to record the cash sales RM 20,700 and credit sales RM13,200 to Rong Qi was recorded as
RM12,000 in his sales account only and the bad debts which happened at Account Receivable - Rong Qi RM 200 was also
omitted.
(Vi) The discounts allowed which amounting to RM200 was posted to the credit side of Discounts Received.
(vii) Sales at 30 Nov 2021 is RM 200 was wrongly recorded as RM 400, both of these accounts were undercast.

The trial balance was found disagree, its debit side was RM 19,800, and its credit side was RM20,200.