IGCSE Accounting

Manarat Ahmed

Course Instructor:

Correcting Errors
Errors Not Affecting Trial Balance
Error of omission: it occurs when a transaction is completely omitted from the books, i.e. no
debit and credit entries were recorded.
For, e.g. purchase of goods for 1000 from G. Wood on credit has been completely omitted from the
books. So, the correction would be, purchase debit 1000 and G. Wood credit 1000.
Error of commission: this type of error occurs when transaction is recorded in the same class but
wrong A/C.
For e.g. purchase of furniture for 500 has been recorded in error to equipment A/C. so, the
correction would be furniture debit 5000 and equipment credit 500
Error of principle:
It occurs when transaction is recorded in a wrong class and in a wrong account
For, e.g. purchase of equipment for 500 has been recorded in error to equipment repairs A/C. So, the
corrected entry is equipment debit 500 and repairs to equipment credit 500.
Error of original entry: It occurs when an item is entered using an incorrect amount.
For, e.g. purchase of equipment for cash 100. So, the correction would be equipment debit 900 and
cash credit 900. (undercast)
Complete reversal of entries: It occurs when a debit entry is recorded on credit side and a credit
entry is recorded on the debit side.
For, e.g. goods sold to K. Ward 500 on credit has been debited to sales A/C and credited to K. Ward
A/C. So, the correction would be, K. Ward debit 1000 and sales credit 1000.
Compensating errors: It occurs when two errors of equal amount, but on opposite sides of the
accounts, cancel out each other. E.g. Sales A/C is overcast by 200 as well as wages ! The trial
balance, therefore, still balances .
Error of transposition : It occurs when the wrong sequence of individual characters within a
number is entered. e.g. 247 is entered as 724.
**While correcting the above errors we do not need a SUSPENSE account.

Errors affecting trial balance :

Additional error :
It occurs when incorrect additions are made in any account.
Posting error:

Correction of errors | 1

Making an entry on only 1 side of the account. E.g. a debit but no credit or a credit but no credit. And
entering a different amount on the debit side from the credit side.
While correcting the above errors we need a SUSPENSE account

Suspense account
A suspense account is an account in the general ledger in which amounts are temporarily recorded
when debit and credit balance of trial balance do not match.

*When a suspense account is opened, the balancing figure is balance b/d.

*If the balance b/d occurs in the debit side, then trial balance has a deficit in the debit side.
*If the balance b/d occurs in the credit side, then trial balance has a deficit in the credit side.
CALCULATION of obtaining Revised/Corrected net profit :
Details
Draft Net profit
ADD : Sales / Income/Return out/Goods drawings
undercast
Purchase / Expenses/Return in overcast
LESS : Sales/Income/Return out overcast
Purchase / Expenses/Return in/Goods drawings
undercast
Revised/Corrected Net profit

Invoice issued
Invoice received
Credit note issued
Credit note received

Correction of errors | 2

= sales
= purchase
= sales return/return inwards
= purchase return/ return outwards

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X
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