Types of Errors (Cambridge (CIE) A Level Accounting): Revision Note
Exam code: 9706
Errors which affect the trial balance
Which errors affect the trial balance?
There are some errors that are identified by the trial balance
The most common reasons for these types of errors are:
Addition errors
Posting errors
Unequal posting errors
Partial omission errors
A suspense account needs to be created to fix these errors
Which are addition errors?
Addition errors occur when:
A calculation error is made when balancing an account
A numerical error is made when totalling the debits or credits in the trial balance
Example
A business has two entries in the drawings account: $550 and $450
The business incorrectly totals this account as $910
Which are posting errors?
Posting errors occur when both entries of a transaction are made on the same side of the accounts
Both are entered as debits or both are entered as credits
Example
A business pays $500 for rent
The rent account is debited $500
The bank account is debited $500
This should be a credit entry
Which are unequal posting errors?
Unequal posting errors occur when a transaction is entered into two accounts using different amounts
Transposition errors are common examples of unequal posting
This is where the digits are entered in the wrong order
Example
A business makes a credit sale of $52
$52 is entered into the sales account
$25 is entered into the trade receivables account
The digits have been switched around
Which are partial omission errors?
Partial omission errors occur when a transaction is only entered once into the ledger accounts
The debit or credit entry is missing
Example
A business takes $200 worth of goods for personal use
They debit the drawings account
But they forget to credit the purchases account
Errors which do not affect a trial balance
Which errors do not affect the trial balance?
There may be errors even though the totals in the trial balance are equal
These errors might be spotted by other means
Control accounts
Bank reconciliation statements
These errors cannot be ignored
They could affect the stated profit
They could affect the stated value of assets and liabilities
They could affect the balances related to other businesses
The six types of errors which do not affect a trial balance are:
Error of omission
Error of original entry
Error of complete reversal
Error of commission
Error of principle
Compensating errors
Error | Description |
|---|---|
Error of omission | The transaction was not entered into any account |
Error of original entry | The transaction was entered into the accounts using an incorrect value |
Error of complete reversal | The transaction was entered on the incorrect sides of the correct accounts |
Error of commission | One entry for a transaction was entered into an incorrect account but the type of account was correct |
Error of principle | One entry for a transaction was entered into an incorrect account and the type of account was incorrect |
Compensating errors | Multiple errors have been made which cancel each other out |
Examiner Tips and Tricks
You need to learn the names and definitions of these six errors! A lot of students get errors of commission and errors of principle mixed up.
Worked Example
Ashika prepared a trial balance which balanced. However, she discovered the following errors.
Payment of cash, $600, to Fran, a credit supplier, had been debited to the account of Fred in the purchases ledger.
Rent paid by direct direct, $800, had not been recorded in the ledger accounts.
Office expenses, $150, had been debited to the office equipment account.
Wages paid, $500, had been debited to the bank account and credited to the wages account.
For each of the items, state the type of error that was made.
Answer:
The debit entry was made in a supplier's account but it was the incorrect supplier
The transaction has not been entered into the accounts
The debit entry was made into an asset account instead of an expense account
The transaction has been entered on the incorrect sides of the correct accounts
Error 1 | Error of commission |
Error 2 | Error of omission |
Error 3 | Error of principle |
Error 4 | Error of complete reversal |
Unlock more, it's free!
Join the 100,000+ Students that ❤️ Save My Exams
the (exam) results speak for themselves:
Was this revision note helpful?
