Denbigh High School

Principles of Accounts
Lesson Notes
Topic: Errors NOT affecting Trial Balance Agreement (Another way in which the
Journal is used to Record the correction of errors)

There are several errors which will not prevent the trial balance from balancing. Although
not affecting the agreement of the trial balance, these errors WILL affect profits, assets and/or
liabilities. As a result they must be FOUND AND CORRECTED to reflect a fair and
accurate view of the business.
The errors which may occur are as follows:
1. errors of omission
2. error of principles
3. error of commission
4. error of original entry
5. complete reversal of entry
6. compensating error

Error of Omission
This occurs when a transaction is completely left out or omitted from the book. Eg.
Electricity paid by cheque for $600 was omitted from the books of J. Green on 31 March
2017.
J. Green
The Journal pg12
Date Details Folio Debit Credit
2017 $ $
March 31 Electricity GL1 600
Bank CB1 600
Error of omission now
corrected

1
Error of Principle

This is entering information in the wrong type of account:

✔ Real – properties of all (types) kinds fixed assets and current assets

✔ Nominal – expenses, revenues, capital

✔ Personal – creditors and debtors

Eg. Bought machine for $6000 on 31 March 2017. This was entered in the purchases account

J. Green
The Journal pg12
Date Details Folio Debit Credit
2017 $ $
March 31 Machine GL2 6000
Purchases GL3 6000
Error of principle now
corrected

Error of Commission
This is when information is recorded in the wrong person’s account. Eg. Sold goods to M. Johnson on
credit for $610, this was entered in N. Johnson’s account on 31 March 2017

J. Green
The Journal pg12
Date Details Folio Debit Credit
2017 $ $
March 31 M. Johnson SL1 610
N. Johnson SL3 610
Error of commission now
corrected

2
Complete Reversal of Entry
This is entering information on the wrong side of the account.
NB
When this error occurs the amount is always doubled. Eg. Purchased goods on credit from P.
Kerr’s for $750 P.Kerr’s account was debited and purchases a/c credited on March 31 2017.

J. Green
The Journal pg12
Date Details Folio Debit Credit
2017 $ $
March 31 Purchases GL3 1500
P. Kerr PL1 1500
Complete reversal of entry
now corrected

Error of Original Entry

This is when the incorrect amount is entered
NB To correct the error the smaller amount is normally DEDUCTED from the larger amount
and the difference is recorded. Eg. Sold goods to M. Kelly for $250 on credit on 31 March
2017. The amount was recorded as $205
J. Green
The Journal pg12
Date Details Folio Debit Credit
2017 $ $
March 31 M. Kelly SL3 45
Sales GL4 45
Error of Original entry now
corrected

3
Compensating Error
This is where errors cancel each other. Eg. Sales and Purchases account were undercast (too
little) by $30 on 31 March 2017.

J. Green
The Journal pg12
Date Details Folio Debit Credit
2017 $ $
March 31 Purchases GL3 30
Sales GL4 30
Compensating error now
corrected

Eg.The sales and purchases account were overcast (too much) by $50 31 March 2017

J. Green
The Journal pg12
Date Details Folio Debit Credit
2017 $ $
March 31 Sales GL4 50
Purchases GL3 50
Compensating error now
corrected

4
 Types of Accounts and their entries
Types of Accounts To Record an Increase To Record a Decrease

Sales Credit Debit

Purchases Debit Credit

Returns Inwards Debit Credit

Returns Outwards Credit Debit

All Expenses Debit Credit

Eg. Rent/Rent Paid
Discounts Allowed
Salaries
Electricity
Sundry Expenses
Commission Paid

All Revenues Credit Debit

Eg. Rent Received
Rates Refund
Commission Received
Discounts Received

All Assets Debit Credit

Eg. Land
Premises
Motor Vehicle
Bank
Cash

All Liabilities Credit Debit

Eg. Loan
Bank Overdraft
Creditors
Mortgage

5
Activity 1

Give the Journal entries needed to record the correction of errors. NARRATIVES ARE
REQUIRED
2012
May 31 A sale of goods $678 to J. Harris had been entered in J. Harts account.
May 31 The purchase of a machine on credit from L. Pyle for $4390 had been
completely omitted from the books
May 31 The purchase of a motor van $3800 had been entered in error in the motor
expenses account.
May 31 A sale of $221 t0 E. Fitzwilliam had been entered in the books, both debit and
credit as $212
May 31 Purchases of $699 on credit from K. Wong had been entered in H. Wood’s
account.
May 31 Sale of goods $442 on credit to B. Ming entered in error B. Gordon’s accounts.
May 31 Commission Received $257 had been entered in error in the sales account.

Activity 2
Show the Journal entries needed to record the corrections of the following.
a. Extra capital of $5000 paid into bank had been credited to sales account.
b. Goods taken for own use $72 had been debited to sundry expenses.
c. Private rent $191 had been debited to the rent account.
d. A purchase of goods from D. Pine $246 had been entered in the books as $426
e. Cash banked $410 had been credited to the bank column and debited to the cash
column in the cashbook.
f. Returns Inwards $195 from G.Will had been entered in error in T. Young’s account.
g. A sale of a printer for $100 had been credited to office expenses

6
Activity 3
Show the Journal entries needed to correct the following errors.
1. The purchase of a machine on credit from O. Paul for $686 had been completely
omitted from the books.
2. Sale of goods $344 on credit to S. Davis entered in error in S. Johnson’s account.
3. The purchase of a motor van $1800 had been entered in error in the motor expense
account.
4. A sale of $554 to A. Edwards had been entered in the books, both debit and credit as
$545
5. The purchase of $799 on credit from R. Campbell had been entered in R. Cameron’s
account.
6. Commission received $837 had been entered in error in the sales account.

Activity 4
Show the Journal entries needed to correct the following errors.
1. A sale of goods $824 to T. More had been entered in T. Mones account.
2. The purchase of a machine on credit from N. Chambers for $961 had been completely
omitted from our books.
3. The purchase of a computer for $550 had been entered in error in the office expenses
account.
4. A sale of $240 to R. Peterkin had been entered in the books, both debit and credit as
$204
5. Commission received $164 had been entered in error in sales account
6. A receipt of cash from C. Richards $68 had been entered on the credit side of the
cashbook and the debit side of C. Richard’s account
7. Discounts allowed $48 had been entered in error on the debit side of the discounts
received account.

PAST PAPER QUESTION

7
V. Cheeseman is preparing his summary account for the month ended 31 August 2011. He
finds the following errors which may or may not affect the summary of the bank account
entries in his Cash Book.
● A purchase of $303, paid by cheque, was recorded in both accounts as a purchase of
goods valued at $330.
● A cheque for $467 sent to creditor R.Sant had been recorded in R. Sant’s account
ONLY.
● A cheque received from C. Samnah for $290 was debited in Samnah’s account and
credited in the Cash Book.
i. Prepare the journal entries to correct the errors above. (Narratives not
required) (7marks)