Correction Of Errors

1. Two different types of Errors

1.1. Errors Not Affecting Trial Balance

1.1.1. These errors are not revealed by trial balance

1.2. Errors Affecting Trial Balance

1.2.1. The errors are revealed by trial balance

2. Errors not affecting trial balance

2.1. Error of Ommission

2.1.1. It's when transactions are omitted from the books. Eg.Bought a furniture costing $200. This transaction is not recorded in the books. Dr Furniture $200 Cr Bank $200

2.2. Error of Commission

2.2.1. It's when the correct amount is entered, but in the wrong account. Eg. ABC paid $150 but was entered in BCD's account. Dr BCD $150 Cr ABC $150

2.3. Error of Principle

2.3.1. It's when the transaction is recorded in the wrong account. Eg. Syarah paid $400 in cheque to settle her debt. This was recorded into the cash account. Dr Bank $400 Cr Syarah $400

2.4. Error of Original Entry

2.4.1. It's when the transactions are recorded correctly but the wrong amount. Eg. Jane bought a machinery for $500. This is recorded in the books as $600. Dr Bank $100 Cr Machinery $100

2.5. Complete Reversal of Entry

2.6. It's when the debit and credit entry recorded for a particular transaction are reversed. Eg. Sue bought an office equipment for $400. She credited $400 in the office equipment account and debited $400 in the bank account. Dr Office Equipment $800 Cr Bank $800

2.7. Compensating Errors

2.8. It's when the same amount of cost difference is found in different on the debit and credit side of the accounts. Eg. It has been found that there was an undercharge of $60 on Danny's account and an overcharge of $60 on May's account. Dr Debtor Danny $60 Cr Debtor May $60

3. Adjustment of net profit

3.1. Add: decrease in expense

3.2. Less: increase in expense

3.3. Eg $

3.4. Unadjusted Net profit 3600

3.5. Add: decrease in expense 100

3.6. Less: increse in expenses (20)

3.7. Adjusted Net Profit 3680