Chapter 26 Errors Not Affecting Trial Balance Agreement

Error of omission A transaction is completely omitted from the books

Error of omission Example: Office furniture had been purchased for $3,600 on credit from Kowloon Co.. This transaction had not been recorded. The bookkeeper found this error on Apr 11, 1996.

Effect on net profit Effect on balance sheet Journal entry of correction No effect FA understated CL understated Dr Office Furniture Cr Kowloon Co.

Date 1996 Particulars Dr $ Cr $ 11/4 Office Furniture3,600 Kowloon Co.3,600 Being office furniture purchased from Kowloon Co. not recorded Journal

Error of commission A transaction is entered in a wrong account of the same class

Error of commission Example: Goods $20,000 sold on credit to Mr. Chan had been entered in the account of Mr. Chen. The bookkeeper found this error on May 1, 1996.

Effect on net profit Effect on balance sheet Journal entry of correction No effect Dr Mr. Chan Cr Mr. Chen

Date 1996 Particulars Dr $ Cr $ 1/5 Mr. Chan20,000 Mr. Chen20,000 Being goods sold to Mr. Chan entered in the account of Mr. Chen Journal

Error of principle A transaction is entered in an account of wrong class

Example: The payment of an invoice $36,000 in respect of repairing the motor vehicle as to prolong the life of that motor vehicle had been debited to the repairs expenses account. The bookkeeper found this error on Jul 26, Error of principle

Effect on net profit Effect on balance sheet Journal entry of correction Understated FA understated Dr Motor Vehicle Cr Repairs Expenses

Date 1996 Particulars Dr $ Cr $ 26/7 Motor Vehicle36,000 Repairs Expenses36,000 Being cost of motor vehicle wrongly debited to the repairs expenses account Journal

Error of original entry Wrong amount is entered in the correct side of the account

Example: Goods $890 sold on credit to Aberdeen Co. had been entered in the books as $980. The bookkeeper found this error on Jun 7, Error of original entry

Effect on net profit Effect on balance sheet Journal entry of correction Overstated CA overstated Dr Sales Cr Aberdeen Co.

Date 1996 Particulars Dr $ Cr $ 7/6 Sales90 Aberdeen Co.90 Being goods $890 sold entered as $980 Journal

Error of duplication A transaction is entered twice in the books

Example: Cheque $3,000 received from Kwun Tong Co. had been entered twice in the cash book. The bookkeeper found this error on Aug 18, Error of duplication

Effect on net profit Effect on balance sheet Journal entry of correction No effect Dr Kwun Tong Co. Cr Cash at Bank

Date 1996 Particulars Dr $ Cr $ 18/8 Kwun Tong Co.3,000 Cash at Bank3,000 Being cheque received from Kwun Tong Co. entered twice in the Cash Book Journal

Compensating error One error cancels the effect of another error coincidently

Example: The telephone account was overstated by $100 while the sales account was overstated by $100, too. The bookkeeper found this error on Sep 16, Compensating error

Effect on net profit Effect on balance sheet Journal entry of correction No effect Dr Sales Cr Telephone Expenses

Date 1996 Particulars Dr $ Cr $ 16/9 Sales100 Telephone Expenses100 Being telephone account and sales account both overstated by $100 Journal

Reversal of entries Double entry has been made, correct in amount but wrongly posted on the reversed sides of the accounts

Example: Goods purchased for cash $2,600 had been entered in the debit side of the cash in hand account and posted to the credit side of the purchases account. The bookkeeper found this error on Nov 11, Reversal of entries

Effect on net profit Effect on balance sheet Journal entry of correction Overstated CA overstated Dr Purchases Cr Cash in Hand

Date 1996 Particulars Dr $ Cr $ 11/11 Purchases5,200 Cash in Hand5,200 Being purchases entered in the wrong sides of both accounts Journal