balancing of the trial balance Learning objectives After you have studied this chapter you should be able to Correct errors which are not revealed by a trial balance Distinguish between the different kinds of errors that may ID: 628510
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Slide1
Chapter 32
Errors not affecting the
balancing of the trial balanceSlide2
Learning objectives
After you have studied this chapter, you should be able
to:
Correct errors which are not revealed by a trial
balance
Distinguish between the different kinds of errors that may
ariseSlide3
Types of errors
There are seven errors that may exist in the double entry bookkeeping but will not be revealed in a trial
balance:
Errors
of omission, where a transaction is completely omitted from the
books.
Errors
of commission, where a transaction is posted to the wrong account name, for instance
K.
Green instead of
C. Green.
Errors
of principle, where a transaction is posted to the wrong class of account, for instance confusing assets with
expenses.Slide4
Types of errors
(Continued
)
Compensating errors, where two completely separate errors cancel each other
out.
Errors
of original entry where the figure posted is
incorrect.
Complete reversal of entries, where the correct accounts are used but the postings were made on the wrong side of the
accounts.
Transposition errors, where the figures posted have been transposed, so £142 was entered instead of £
124.Slide5
How to correct errors
Errors are always corrected by:
Constructing a journal entry and including a suitable
narrative.
Posting the journal entries to the ledger accounts to correct the
error.Slide6
Error of omission
A sale of £59 worth of goods to
E.
George has been completely omitted from the
booksSlide7
Error of commission
A purchase of £44 worth of goods from
C.
Simons on 4 September was entered in error in
C.
Simpson’s account.
The
error was found on 30
September.Slide8
Error of commission
(Continued
)Slide9
Error of principle
The purchase of a machine for £200 is debited to the purchases account instead of being debited to a machinery
account.Slide10
Compensating error
In the cash book, the amount of cash sales transferred to the sales account was overstated by £20 and the amount transferred to the wages account was
also overstated by £20.Slide11
Error of original entry
A sale of £38 to
A.
Smailes
was entered in the books as £
28.Slide12
Complete reversal of entries
A payment of cash of £16 to
M.
Dickson was entered on the receipts side of the cash book in error and credited to
M.
Dickson’s
account.Slide13
Transposition error
A credit purchase from
P.
Maclaran
costing £56 was entered in the books as £
65.Slide14
Learning outcomes
You should have now
learnt:
How to describe each of a range of possible errors that can be made when recording financial transactions in the accounts that will not be detected by producing a trial
balance
How to identify and correct each of these types of
errorsSlide15
Learning outcomes
(Continued
)
That when errors are found, they should be amended by using proper double entry
procedures
That all corrections of errors should take place via the Journal, where entries are first recorded before being posted to the appropriate
ledger
accounts