Error of Transposition

What is Transposition error? Transposition error is an error occurs by the reversal of digits such as recording 87 for 78, or 420 for 402. A slide is the entry of a number with an incorrectly placed decimal points, such as recording 2,170 for 21,700, or 4,500 for 450. How to locate and Rectify Transposition …

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Rectification of errors

What is the Rectification of errors? In accounting, errors are the ‘mistakes’ committed by the book-keeper or accountant. These mistakes may occur while classifying the accounts, writing the subsidiary books, posting the entries to ledger accounts, casting totals, balancing the accounts, carrying the balances forward and so on. The process of finding and correcting these …

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Classification of errors in accounting

Accounting errors can be broadly classified into two groups: those that affect the agreement of a trial balance and those that don’t. Errors not affecting the trial balance A trial balance will not be affected if the total of all debit entries in the ledger is equal to the total of all credit entries. Thus …

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Errors of omission

Errors of Omission – Definition When some transactions are completely omitted from the books of accounts or entered but not posted, they are treated as errors of omission. or If a transaction is omitted altogether from the books of accounts, there would be neither a debit nor a credit entry in the ledger. Hence the …

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Errors of commission

Errors of Commission – Definition These types of errors occur due to the negligence of book-keeper, clerk or accountant. As errors of commission are often caused due to the mistake committed by the clerk, they are also called as clerical errors. Also known as error of inadvertence. If we debit or credit an account, other …

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Errors of principle

Errors of principle – Definition Errors of principle are caused due to a book-keeper’s or an accountant’s ignorance or improper understanding of principles of accounting. This error resembles error of commission, except in one respect. Errors of commission usually result in an oversight whereas an error of principle is caused by a lack of knowledge …

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Errors in original entry

Explanation If a transaction is recorded at an incorrect amount in the subsidiary book, both the debit and credit entries made subsequently in the ledger would be incorrect though equal in figures. This will obviously not affect the trial balance. Effect on accounts This will be either of the following: If the transaction is recorded …

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Complete reversal of entries

Explanation If a transaction is so recorded that the account to be debited is credited and the account to be credited is debited, both with the correct amount, the debit and credit entries in the ledger would be equal and the trial balance will remain unaffected. Effect on accounts The account to be debited is …

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Errors not affecting trial balance

This error can take several forms. Some examples are given below: A transaction may be entered in the subsidiary book at a wrong amount (error in original entry) and later debited or credited to a wrong account in ledger (error of commission). A capital expenditure may be treated as a revenue expenditure and at the …

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Compensating errors

Compensating Errors – Definition In the case of compensating errors, we observe that one of the errors already committed being offset by another error or more than one errors. That means, compensating errors are caused due to the errors committed to compensate each other or offset each other. Explanation of Compensating Errors In fact, when …

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Errors affecting the trial balance

Which errors actually affect the trial balance? These errors usually involve only one account in any transaction. That account has either: an over-debit or an over-credit an under-debit or an under-credit To rectify an error that has affected the Trial Balance needs only one entry in the relevant account. This will bring the trial balance …

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Miscast in subsidiary account

If a subsidiary book is miscast, (i.e. wrongly totaled), the account to which its total is posted in the ledger would show an incorrect amount whereas the individual accounts poted from the subsidiary book would total up to a different but accurate figure. Example The Sales Book is under-cast by $1,000. The correct total is …

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Error in balancing an account

If an arithmetical error is made while balancing a ledger account, the error will be confined to that one particular account only. However, this will cause the two sides of the trial balance to give different totals. This error may result in: Either the account showing a balance larger than the correct balance, i.e. an …

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Other uses of suspense account

One important use of Suspense Account is to bring the trial balance into agreement. The other uses are: (a). If a book-keeper is not sure which account to debit or credit in a particular transaction, he can temporarily place the entry into a Suspense Account, and later when it is confirmed as to which account …

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