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BY: Kimandra Welch and Daviandra Small
 Accounting
Error
An accounting error is an error in an
accounting entry that was not intentional.
When spotted, the error or mistake is often
immediately fixed. If there is no immediate
resolution, an investigation into the error is
conducted. An accounting error should not be
confused with fraud, which is an intentional
act to hide or alter entries for the benefit of the
firm. Although there are numerous types of
errors, the most common accounting errors
are either clerical mistakes or errors of
accounting principle

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Significance of
error identification
in accounting.
Accounting errors can cause problems
with compliance reporting, such as
financial statements, debt covenants
and tax filings, which, in turn, can
trigger audits, penalties and fines. For
these reasons, it's important to reduce
the occurrence of errors and increase
the ability to detect them when they
arise.

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 Common
accounting
Errors
1. Errors of Commision
2. Errors of Principle
3. Errors of Omissions
4. Errors of Original Entry
5. Compensaing Error
6. Error of Entry Reversal

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Errors of Correcting Errors of Comission
Comission To correct an error of commission, you must first reverse
the incorrect amount and then enter the correct amount.
Example 1: D. Long paid us $50 by cheque on 18 May 2017.
The transaction is correctly entered in the cash book, but
it was entered by mistake in the account for T. Lee. This
Error of commission is an error that occurs when a means that there had been both a debit of $50 and a
bookkeeper or accountant records a debit or credit to the credit of $50. It has appeared in the personal account as:
correct account but to the wrong subsidiary account or
ledger. For example, money that has been received from
a customer is credited properly to the accounts
receivable account, but to the wrong customer. The error
would show on the accounts receivable subsidiary ledger,
which contains all of the customers' invoices and
transactions.

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Error of
principle
Error of accounting principle occurs when an
accounting principle is applied in error. For example,
an equipment purchase is posted as an operating
expense. The operating expenses are the day-to-day
expenses and wouldn't include a fixed-asset
purchase. Also, asset purchases should be recorded
on the balance sheet while operating expenses
should be recorded on the income statement.
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Correcting Errors of Principle in Accounting
To correct this type of error, simply enter offsetting
debits and credits to the affected accounts.Example 2:
The purchase of a motor car for $5,500 by cheque on 14
May 2017 has been debited in error to a motor expenses
account. In the cash book it is shown correctly. This
means that there has been both a debit of $5,500 and a
credit of $5,500.
It will have appeared in the expense account as:
Error of Correcting Errors of Omission in Accounting

Omission A complete error of omission – the bookkeeper failed to

enter the transaction altogether.

A partial error of omission – the transaction has been

An error of omission is when an entry wasn't made even
though a transaction had occurred for the period. For
example, an accounts payable account, which are the
short-term debts that companies owe suppliers and
vendors, is not credited when goods were purchased on
credit. This is common when there are many invoices
from vendors that need to be recorded, and the invoice
gets lost or not recorded properly
\
recorded only on one side of the ledger. The illustration
below shows the partial omission of an accounts receivable
account not debited where goods were sold on credit.
To correct a partial error of omission, simply enter the
missing half of the transaction.Example 4: We purchased
goods from C. Richards for $250 on 13 May 2017 but did not
enter the transaction in the accounts. So there were nil
debits and nil credits. We found the error on 31 May 2017.
The entries to correct it will be thus:

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Error of
Original Entry
An error of original entry is when the wrong amount
is posted to an account. The error posted for the
wrong amount would also be reflected in any of the
other accounts related to the transaction. In other
words, all of the accounts involved would be in
balance but for the wrong amounts.
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Correcting Errors of Original
Entry
To correct an error of original entry, reverse the
incorrect transaction and then record the transaction
with the correct value.
Example 3: Sales of $150 to T. Marley on 13 May 2017
have been entered as both a debit and a credit of $130.
The accounts would appear thus:
Error of
Compensaing
Compensating error is when one error has been
compensated by an offsetting entry that's also in error.
For example, the wrong amount is recorded in inventory
and is balanced out by the same wrong amount being
recorded in accounts payable to pay for that inventory
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Correcting Compensating Errors
To correct a compensating error, reverse the incorrect
transactions and then enter the correct transactions.
Example 5: Let us take a case where incorrect totals had
purchases of
$7,900 and sales of $9,900. The purchases day book
adds up to be $100 too much. In the same period, the
sales day book also adds up to be $100 too much.
Error of
Reversal
Error of entry reversal is when the accounting entry is
posted in the wrong direction, meaning a debit was
recorded as a credit or vice versa. For example, cost of
goods sold, which contains raw materials and
inventory, is credited instead of debited and finished
inventory is debited instead of credited.
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Correcting Complete Reversal
of Entries
Correct this error by reversing the incorrect debit
and entering the correct credit.
Example 6: We pay a cheque for $200 on 28 May
2017 to D. Charles. We enter it as follows in
accounts with the letter (A). There has, therefore,
been both a debit and a credit of $200.
 Why businesses
must correct
accounting errors
regularly
 01
1. Ensure accurate financial
reports
Incorrect financial reports can
disrupt business sustainability.
Financial reports are critical
documents that can help with
making investment decisions.
Incorrect figures can affect a
business’s ability to receive
financial assistance, including
timely loans.
02 03
2. Help during tax time
3.Help save unnecessary costs
Updated accounting and
Catch-up services can often
bookkeeping help with
prove to be expensive to
compliance during tax season.
correct last minute.
Catch-up is central to tax
Expertise can be expensive and
calculations and audited
may even prove to be difficult
financial statements.
to access when required.
Updated and well-managed
Timely catch-up and correction
accounting is important during
can help businesses
tax season.
significantly. save on costs
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 04
4.Ensure better security for data and
information

Correcting errors in business

accounting can also help improve
security. The entire process, beginning
with the process of reviewing books,
can help businesses understand their
business bookkeeping in better detail.
As reviews reveal possible vulnerabilities
and threats, catch-up in business
accounting can also help business leaders
design better preventive solutions for data
security.

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