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Edexcel igcse correction of errors

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Sanjaya Jayasundara
Sanjaya Jayasundara

Edexcel IGCSE & O Level Accounting Correction of errors Situations where errors occur Two types of errors Trial Balance Errors which do not affect Trial Balance agreement Omission, Commission, Original Entry, Principal, Compensation, Complete Reversal, Duplication Errors which affect the agreement of trial balance suspense account All igcse past papers model questions

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Correction of Errors Accounting with Sanjaya 1 Correction of Errors Sanjaya Jayasundara B.Sc.(Finance) Sp. University of Sri Jayewardenepura, Investment Advisor, International School Teacher
Correction of Errors Accounting with Sanjaya 2 Content Introduction. The situations where accounting errors take place. Type of accounting errors. Suspense Account Statements of revised/corrected profit Past paper questions. Model questions. Syllabus according to Edexcel IGCSE Topic 3: Introduction to control processes 3 Correction of errors a) Identify and explain errors that do and do not affect the balancing of the trial balance. b) Prepare journal entries to correct errors. c) Prepare a suspense account.
Correction of Errors Accounting with Sanjaya 3 Introduction. …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… The situation where accounting errors take place. 1. In preparing source documents. 2. In preparing prime entry books. 3. In preparing ledger. 4. In preparing trial balance.
Correction of Errors Accounting with Sanjaya 4 Type of accounting errors. There are two types of errors. 1) ………………………………………………………………………………………………………………………………… 2) ………………………………………………………………………………………………………………………………… Errors which are not shown by a trial balance. 1) Errors of omission. 2) Errors of commission. 3) Errors of originality. 4) Errors of principle. 5) Errors of compensating. 6) Errors of complete reversal. 01) Errors of omission. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example- Goods sold on credit to Ken, $700, had not been recorded in the books The/General Journal Description/Details Debit Credit
Correction of Errors Accounting with Sanjaya 5 02) Errors of Commission. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example: - Cash received from D Dias $200 entered correctly in Cash book but it was entered by mistake in the account for G Dias. The/General Journal Description/Details Debit Credit 03) Errors of original entry. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example 1 – Goods sold on credit to Timmy , $960,had been recorded in the sales journal as $690. The/General Journal Description/Details Debit Credit Example 2 – Discount received amounting to $780 has been recorded in the books as $870. The/General Journal Description/Details Debit Credit
Correction of Errors Accounting with Sanjaya 6 04) Errors of Principles. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example 1:- Purchase of a furniture worth $1000 has been debited to purchase account. The/General Journal Description/Details Debit Credit Example 2 – Building repair expenses of $200 has been recorded in the Building Account. The/General Journal Description/Details Debit Credit 05) Errors of compensating. .............................................................................................................................. .............................................................................................................................. .............................................................................................................................. Example: - The Heating and lighting account had been under-cast by $300 and the purchases account had been over-cast by $300. The/General Journal Description/Details Debit Credit
Correction of Errors Accounting with Sanjaya 7 06) Errors of complete reversal. .............................................................................................................................. .............................................................................................................................. .............................................................................................................................. Example: - Payment of $ 200 to Charles (who is a creditor) has been entered in correct accounts but in incorrect sides. The/General Journal Description/Details Debit Credit 02) Errors affecting trial balance agreement * Due to some errors the totals of debit and credit balances of the trial balance do not agree. Steps to be taken to rectify the errors 01) Find out the difference. 02) As the reason for this difference is not sure (suspense), write the word “Suspense Account” in front of the difference and balance the trial balance temporarily. 03) Find out the reasons for difference. 04) Rectify the errors using journal entries. Suspense Account .............................................................................................................................. .............................................................................................................................. .............................................................................................................................. Reasons for disclosed errors 01) Omission of one entry. 02) Recording two different amounts. 03) Recording the double entry in the same side of the both accounts. 04) Errors in casting, balancing & transferring of prime entry books into ledger accounts. 05) Errors in preparation of the trial balance.
Correction of Errors Accounting with Sanjaya 8 Examples for disclosed errors 01) Omission of one entry ......................................................................................................................... ......................................................................................................................... Example: - Telephone bill paid $500 entered only in cash book but not in Telephone bill account. The/General Journal Description/Details Debit Credit 02) Recording two different amounts ......................................................................................................................... ......................................................................................................................... Example: - Rent expenses paid, $1600, had been correctly entered in the cash book, but had been recorded in the general expenses account as $6100. The/General Journal Description/Details Debit Credit 03) Recording the double entry in the same side of both accounts. ......................................................................................................................... ......................................................................................................................... Example: - Salary payment $1500 has been recorded in the debit side of both accounts. The/General Journal Description/Details Debit Credit
Correction of Errors Accounting with Sanjaya 9 04) Errors in casting, balancing & transferring of prime entry books into ledger accounts. ......................................................................................................................... ......................................................................................................................... Example: - $350 has been under-cast in totaling the Sales Return Journal. The/General Journal Description/Details Debit Credit 05) Errors in preparation of the trial balance. ......................................................................................................................... ......................................................................................................................... Example: - $425 the balance of Discount Received Account has not been extracted to the trial balance. The/General Journal Description/Details Debit Credit ......................................................................................................................... .........................................................................................................................
Correction of Errors Accounting with Sanjaya 10 Statements of revised profit. Sometime business has to prepare financial statements with a suspense accounts. That means they prepare financial statements with errors for tax payment purpose or to present for Annual General Meeting (AGM). Those financial statements are called incorrect or draft financial statements and after identifying the errors the result of draft financial statements should be rectified while rectifying the errors through double entries. Then to rectify the result of draft Income Statement (draft profit or loss) a statement can be prepared as follows. The Statement of rectifying the draft profit £ £ Draft profit ××××× Add: Credit entries to expenses accounts (decrease in expenses in correction) ××× Credit entries to incomes accounts (increase in incomes in correction) ××× ××× ××××× Less: Debit entries to expenses accounts (increase in expenses in correction) ××× Debit entries to incomes accounts (decrease in incomes in correction) ××× (×××) Revised/Corrected profit ××××
Correction of Errors Accounting with Sanjaya 11 Past Paper Questions May/June 2019 – Paper 1
Correction of Errors Accounting with Sanjaya 12 May/June 2019 – Paper 1 - R
Correction of Errors Accounting with Sanjaya 13 ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .........................................................................................................................
Correction of Errors Accounting with Sanjaya 14 May 2017 – Paper 1 – Q.12
Correction of Errors Accounting with Sanjaya 15 May 2016 – Paper 1 – Q.12
Correction of Errors Accounting with Sanjaya 16 January 2016 – Paper 1 13 At the year end of 30 September 2015 the trial balance of Havisham, a sole trader, balanced. During the following month the following errors were discovered. (a) Complete the following table to show the type of error in each case. (3) Error Type of Error A sale of goods on credit, £350, to Z Malik had not been recorded in the books. A cheque received from L Payne, a debtor, had been entered in the accounts as £182, instead of the correct figure of £128. A payment to R Charles a supplier, £732, had been entered in the account of R Charters. (b) Prepare journal entries to correct these errors. Narratives are not required. (6) The Journal Debit £ Credit £ (c) State one other use of the general journal in addition to correction of errors. (1) .................................................................................................................................................................................................................................................................................... (Total for Question 13 = 10 marks) Just try this MCQ for a change
Correction of Errors Accounting with Sanjaya 17 May 2015 – Paper 1
Correction of Errors Accounting with Sanjaya 18 Just try this MCQ
Correction of Errors Accounting with Sanjaya 19 May 2014 – Paper 1 – Q13
Correction of Errors Accounting with Sanjaya 20 January 2013 – Paper 1
Correction of Errors Accounting with Sanjaya 21
Correction of Errors Accounting with Sanjaya 22 January 2012 – Paper 1
Correction of Errors Accounting with Sanjaya 23 May 2011 – Paper 1
Correction of Errors Accounting with Sanjaya 24
Correction of Errors Accounting with Sanjaya 25 Extra Question – Cambridge O Level May/June 2018 – Paper 2
Correction of Errors Accounting with Sanjaya 26
Correction of Errors Accounting with Sanjaya 27 Model Question The trial balance prepared as at 31st March 2018 by Chathura PLC did not tally. The difference of the trial balance $55 000 was credited to a suspense account. Subsequent examination of accounting records revealed following errors. (01) A sales invoice of $15 000 has been omitted from the books. (02) Bank loan repayment of $10 000 has been recorded only in the cash book. (03) Dividend income of $45 000 has been recorded in dividend income account as $25 000. (04) $15 000 the balance of one page of the Sales account has not been brought forward to the next page. (05) Rent income $20 000 has not been recorded in the trial balance. (06) Interest received $5 000 has been recorded debit side in the Interest expense account. (a) Prepare the journal entries required to correct each of the errors (1) to (6).narrative are not required. The Journal Debit ($) Credit ($) (b) Prepare the suspense account at 31 March 2018. Suspense account Date Details $ Date Details $
Correction of Errors 28Correction of Errors A small advice from your teacher You are good enough. Most people are afraid to do things because they are afraid they’re not good enough, afraid they’ll fail. But you are good enough — learn that and you won’t be afraid of new things, won’t be afraid to fail, won’t need the approval of others. You’ll be pre-approved — by yourself. All you need to be happy is within you. Many people seek happiness in food, drugs, alcohol, shopping, partying, sex … because they’re seeking external happiness. They don’t realize the tools for happiness aren’t outside them. They’re right inside you: mindfulness, gratitude, compassion, thoughtfulness, the ability to create and do something meaningful, even in a small way. All the best children….! Like me on Facebook : ‘ Accounting with Sanjaya Sir ‘ For short notes : https://www.slideshare.net/SanjayaJayasundara

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Edexcel igcse correction of errors

  • 1. Correction of Errors Accounting with Sanjaya 1 Correction of Errors Sanjaya Jayasundara B.Sc.(Finance) Sp. University of Sri Jayewardenepura, Investment Advisor, International School Teacher
  • 2. Correction of Errors Accounting with Sanjaya 2 Content Introduction. The situations where accounting errors take place. Type of accounting errors. Suspense Account Statements of revised/corrected profit Past paper questions. Model questions. Syllabus according to Edexcel IGCSE Topic 3: Introduction to control processes 3 Correction of errors a) Identify and explain errors that do and do not affect the balancing of the trial balance. b) Prepare journal entries to correct errors. c) Prepare a suspense account.
  • 3. Correction of Errors Accounting with Sanjaya 3 Introduction. …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………… The situation where accounting errors take place. 1. In preparing source documents. 2. In preparing prime entry books. 3. In preparing ledger. 4. In preparing trial balance.
  • 4. Correction of Errors Accounting with Sanjaya 4 Type of accounting errors. There are two types of errors. 1) ………………………………………………………………………………………………………………………………… 2) ………………………………………………………………………………………………………………………………… Errors which are not shown by a trial balance. 1) Errors of omission. 2) Errors of commission. 3) Errors of originality. 4) Errors of principle. 5) Errors of compensating. 6) Errors of complete reversal. 01) Errors of omission. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example- Goods sold on credit to Ken, $700, had not been recorded in the books The/General Journal Description/Details Debit Credit
  • 5. Correction of Errors Accounting with Sanjaya 5 02) Errors of Commission. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example: - Cash received from D Dias $200 entered correctly in Cash book but it was entered by mistake in the account for G Dias. The/General Journal Description/Details Debit Credit 03) Errors of original entry. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example 1 – Goods sold on credit to Timmy , $960,had been recorded in the sales journal as $690. The/General Journal Description/Details Debit Credit Example 2 – Discount received amounting to $780 has been recorded in the books as $870. The/General Journal Description/Details Debit Credit
  • 6. Correction of Errors Accounting with Sanjaya 6 04) Errors of Principles. ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... Example 1:- Purchase of a furniture worth $1000 has been debited to purchase account. The/General Journal Description/Details Debit Credit Example 2 – Building repair expenses of $200 has been recorded in the Building Account. The/General Journal Description/Details Debit Credit 05) Errors of compensating. .............................................................................................................................. .............................................................................................................................. .............................................................................................................................. Example: - The Heating and lighting account had been under-cast by $300 and the purchases account had been over-cast by $300. The/General Journal Description/Details Debit Credit
  • 7. Correction of Errors Accounting with Sanjaya 7 06) Errors of complete reversal. .............................................................................................................................. .............................................................................................................................. .............................................................................................................................. Example: - Payment of $ 200 to Charles (who is a creditor) has been entered in correct accounts but in incorrect sides. The/General Journal Description/Details Debit Credit 02) Errors affecting trial balance agreement * Due to some errors the totals of debit and credit balances of the trial balance do not agree. Steps to be taken to rectify the errors 01) Find out the difference. 02) As the reason for this difference is not sure (suspense), write the word “Suspense Account” in front of the difference and balance the trial balance temporarily. 03) Find out the reasons for difference. 04) Rectify the errors using journal entries. Suspense Account .............................................................................................................................. .............................................................................................................................. .............................................................................................................................. Reasons for disclosed errors 01) Omission of one entry. 02) Recording two different amounts. 03) Recording the double entry in the same side of the both accounts. 04) Errors in casting, balancing & transferring of prime entry books into ledger accounts. 05) Errors in preparation of the trial balance.
  • 8. Correction of Errors Accounting with Sanjaya 8 Examples for disclosed errors 01) Omission of one entry ......................................................................................................................... ......................................................................................................................... Example: - Telephone bill paid $500 entered only in cash book but not in Telephone bill account. The/General Journal Description/Details Debit Credit 02) Recording two different amounts ......................................................................................................................... ......................................................................................................................... Example: - Rent expenses paid, $1600, had been correctly entered in the cash book, but had been recorded in the general expenses account as $6100. The/General Journal Description/Details Debit Credit 03) Recording the double entry in the same side of both accounts. ......................................................................................................................... ......................................................................................................................... Example: - Salary payment $1500 has been recorded in the debit side of both accounts. The/General Journal Description/Details Debit Credit
  • 9. Correction of Errors Accounting with Sanjaya 9 04) Errors in casting, balancing & transferring of prime entry books into ledger accounts. ......................................................................................................................... ......................................................................................................................... Example: - $350 has been under-cast in totaling the Sales Return Journal. The/General Journal Description/Details Debit Credit 05) Errors in preparation of the trial balance. ......................................................................................................................... ......................................................................................................................... Example: - $425 the balance of Discount Received Account has not been extracted to the trial balance. The/General Journal Description/Details Debit Credit ......................................................................................................................... .........................................................................................................................
  • 10. Correction of Errors Accounting with Sanjaya 10 Statements of revised profit. Sometime business has to prepare financial statements with a suspense accounts. That means they prepare financial statements with errors for tax payment purpose or to present for Annual General Meeting (AGM). Those financial statements are called incorrect or draft financial statements and after identifying the errors the result of draft financial statements should be rectified while rectifying the errors through double entries. Then to rectify the result of draft Income Statement (draft profit or loss) a statement can be prepared as follows. The Statement of rectifying the draft profit £ £ Draft profit ××××× Add: Credit entries to expenses accounts (decrease in expenses in correction) ××× Credit entries to incomes accounts (increase in incomes in correction) ××× ××× ××××× Less: Debit entries to expenses accounts (increase in expenses in correction) ××× Debit entries to incomes accounts (decrease in incomes in correction) ××× (×××) Revised/Corrected profit ××××
  • 11. Correction of Errors Accounting with Sanjaya 11 Past Paper Questions May/June 2019 – Paper 1
  • 12. Correction of Errors Accounting with Sanjaya 12 May/June 2019 – Paper 1 - R
  • 13. Correction of Errors Accounting with Sanjaya 13 ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .........................................................................................................................
  • 14. Correction of Errors Accounting with Sanjaya 14 May 2017 – Paper 1 – Q.12
  • 15. Correction of Errors Accounting with Sanjaya 15 May 2016 – Paper 1 – Q.12
  • 16. Correction of Errors Accounting with Sanjaya 16 January 2016 – Paper 1 13 At the year end of 30 September 2015 the trial balance of Havisham, a sole trader, balanced. During the following month the following errors were discovered. (a) Complete the following table to show the type of error in each case. (3) Error Type of Error A sale of goods on credit, £350, to Z Malik had not been recorded in the books. A cheque received from L Payne, a debtor, had been entered in the accounts as £182, instead of the correct figure of £128. A payment to R Charles a supplier, £732, had been entered in the account of R Charters. (b) Prepare journal entries to correct these errors. Narratives are not required. (6) The Journal Debit £ Credit £ (c) State one other use of the general journal in addition to correction of errors. (1) .................................................................................................................................................................................................................................................................................... (Total for Question 13 = 10 marks) Just try this MCQ for a change
  • 17. Correction of Errors Accounting with Sanjaya 17 May 2015 – Paper 1
  • 18. Correction of Errors Accounting with Sanjaya 18 Just try this MCQ
  • 19. Correction of Errors Accounting with Sanjaya 19 May 2014 – Paper 1 – Q13
  • 20. Correction of Errors Accounting with Sanjaya 20 January 2013 – Paper 1
  • 22. Correction of Errors Accounting with Sanjaya 22 January 2012 – Paper 1
  • 23. Correction of Errors Accounting with Sanjaya 23 May 2011 – Paper 1
  • 25. Correction of Errors Accounting with Sanjaya 25 Extra Question – Cambridge O Level May/June 2018 – Paper 2
  • 27. Correction of Errors Accounting with Sanjaya 27 Model Question The trial balance prepared as at 31st March 2018 by Chathura PLC did not tally. The difference of the trial balance $55 000 was credited to a suspense account. Subsequent examination of accounting records revealed following errors. (01) A sales invoice of $15 000 has been omitted from the books. (02) Bank loan repayment of $10 000 has been recorded only in the cash book. (03) Dividend income of $45 000 has been recorded in dividend income account as $25 000. (04) $15 000 the balance of one page of the Sales account has not been brought forward to the next page. (05) Rent income $20 000 has not been recorded in the trial balance. (06) Interest received $5 000 has been recorded debit side in the Interest expense account. (a) Prepare the journal entries required to correct each of the errors (1) to (6).narrative are not required. The Journal Debit ($) Credit ($) (b) Prepare the suspense account at 31 March 2018. Suspense account Date Details $ Date Details $
  • 28. Correction of Errors 28Correction of Errors A small advice from your teacher You are good enough. Most people are afraid to do things because they are afraid they’re not good enough, afraid they’ll fail. But you are good enough — learn that and you won’t be afraid of new things, won’t be afraid to fail, won’t need the approval of others. You’ll be pre-approved — by yourself. All you need to be happy is within you. Many people seek happiness in food, drugs, alcohol, shopping, partying, sex … because they’re seeking external happiness. They don’t realize the tools for happiness aren’t outside them. They’re right inside you: mindfulness, gratitude, compassion, thoughtfulness, the ability to create and do something meaningful, even in a small way. All the best children….! Like me on Facebook : ‘ Accounting with Sanjaya Sir ‘ For short notes : https://www.slideshare.net/SanjayaJayasundara