Accounting Errors

Accounting errors are the errors committed by persons responsible for recording and maintaining
accounts of a business firm in the course of accounting process. These errors may be in the form of
omitting the transactions to record, recording in wrong books, or wrong account or wrong totalling
and so on. Accounting Errors can be classified as:

Errors of omission - When business transaction is either completely or partly omitted to be recorded
in the books of prime entry it is called an ‘error of omission’. When a business transaction is omitted
completely, it is called a ‘complete error of omission”, and when a business transaction is partly
omitted, it is called a “partial error of omission”. A complete error of omission does not affect the
agreement of trial balance whereas a partial error of omission may or may not affect the agreement
of trial balance. An example of a complete error of omission is goods purchased or sold may not be
recorded in the purchase book or sales book at all. An example of a partial error of omission is goods
purchased for Rs. 5,500 recorded in Purchase Book for Rs. 550.

Error of commission - Such errors are generally committed by the clerical staff due to their
negligence during the course of recording business transactions in the books of accounts. Though,
the rules of debit and credit are followed properly yet some mistakes are committed. These mistakes
may be due to wrong posting of a business transaction either to a wrong account or on the wrong
side of an account, or due to wrong casting (addition) i.e. over-casting or under-casting or due to
wrong balancing of the accounts in the ledger.

Compensating errors - compensating errors are those errors, which cancel or compensate
themselves. for example, overposting on one side may be compensated by under posting of an equal
amount on the same side of the same account or over posting of one side of an account may be
compensated by an equal overprinting on the opposite side of some other account. but these errors
do not affect the trial balance.