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Chapter 26

Chapter 26. Errors Not Affecting Trial Balance Agreement. Error of omission. A transaction is completely omitted from the books. Error of omission. Example:

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Chapter 26

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  1. Chapter 26 Errors Not Affecting Trial Balance Agreement

  2. Error of omission • A transaction is completely omitted from the books

  3. 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.

  4. No effect FA understated CL understated Dr Office Furniture Cr Kowloon Co.

  5. Journal 11/4 Office Furniture 3,600 Kowloon Co. 3,600 Being office furniture purchased from Kowloon Co. not recorded

  6. Error of commission • A transaction is entered in awrong account of the same class

  7. 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.

  8. No effect No effect Dr Mr. Chan Cr Mr. Chen

  9. Journal 1/5 Mr. Chan 20,000 Mr. Chen 20,000 Being goods sold to Mr. Chan entered in the account of Mr. Chen

  10. Error of principle • A transaction is entered in anaccount of wrong class

  11. Error of principle • 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, 1996.

  12. Understated FA understated Dr Motor Vehicle Cr Repairs Expenses

  13. Journal 26/7 Motor Vehicle 36,000 Repairs Expenses 36,000 Being cost of motor vehicle wrongly debited to the repairs expenses account

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

  15. Error of original entry • 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, 1996.

  16. Overstated CA overstated Dr Sales Cr Aberdeen Co.

  17. Journal 7/6 Sales 90 Aberdeen Co. 90 Being goods $890 sold entered as $980

  18. Error of duplication • A transaction is entered twice in the books

  19. Error of duplication • 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, 1996.

  20. No effect No effect Dr Kwun Tong Co. Cr Cash at Bank

  21. Journal 18/8 Kwun Tong Co. 3,000 Cash at Bank 3,000 Being cheque received from Kwun Tong Co. entered twice in the Cash Book

  22. Compensating error • One error cancels the effect of another error coincidently

  23. Compensating error • 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, 1996.

  24. No effect No effect Dr Sales Cr Telephone Expenses

  25. Journal 16/9 Sales 100 Telephone Expenses 100 Being telephone account and sales account both overstated by $100

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

  27. Reversal of entries • 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, 1996.

  28. Overstated CA overstated Dr Purchases Cr Cash in Hand

  29. Journal 11/11 Purchases 5,200 Cash in Hand 5,200 Being purchases entered in the wrong sides of both accounts

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