The document discusses various types of errors that may occur in accounting records and how to correct them. It describes errors that do and do not affect the trial balance agreement. Methods for correcting errors include making adjusting journal entries, using a suspense account to temporarily resolve imbalances, and recalculating accounts after errors are fixed. The goal is to identify errors and make necessary corrections to ensure accurate financial reporting.

1. Week 10 CORRECTION OF ERRORS AND SUSPENSE ACCOUNT

4. Recap: Analyzing and Recording Process Analyze each transaction and event form source documents Record relevant transactions and events in a journal Post journal information to ledger accounts Prepare and analyze the trial balance DISCOVER ERROR!!!

11. CORRECTION OF ERRORS - Errors of Omission The journal entry is as follows: General Journal Particulars Dr (RM) Cr (RM) Actual: Rent 1,600 Cash 1,600 Error: Rent 0 Cash 0 Correction: Rent 1,600 Cash 1,600 Being correction of error – payment for rent omitted from books 1 st Step 2 nd Step 3 rd Step

12. CORRECTION OF ERRORS - Errors of Commission An entry has been posted to the wrong account of the same category. X EXAMPLE A sale of RM150 to Folin Brothers has been posted to Lin Associates. √ Correct entry: Dr Debtor-Folin Brother Cr Sales RM 150 Dr Sales Cr Debtor- Folin Brother RM 150 1 st Step 2nd Step 3rd Step Error: Dr Debtor- Lin Associates Cr Sales RM 150 Dr Sales Cr Debtor - Lin Associates RM 150 Correction: Dr Debtor- Folin Brother Cr Debtor- Lin Associates RM 150 Dr Debtor- Lin Associates Cr Debtor- Folin Brother RM 150

13. CORRECTION OF ERRORS - Errors of Commission The journal entry is as follows: √ X General Journal Particulars Dr (RM) Cr (RM) Actual: Folin Brother 150 Sales 150 Errors: Lin Associates 150 Sales 150 Correction: Folin Brother 150 Lin Associates 150 Being correction of error – Lin Associates wrongly debited 1 st Step 2 nd Step 3 rd Step

14. X √ CORRECTION OF ERRORS - Errors of Principle An entry is posted to an account of a different category e.g. an expense is recorded as an asset. EXAMPLE Repairs to vehicles amounting to RM 1,000 has been posted to Vehicles Account. Correct entry: Dr Repair expense Cr Cash/ Acct. payable RM 1,000 Dr Cash / Account payable Cr Repair RM 1,000 1 st Step 2nd Step 3rd Step Error: Dr Vehicle Account Cr Cash/ acct payable RM 1,000 Dr Cash/ account payable Cr Vehicle RM 1,000 Correction: Dr Repair expense Cr Vehicle RM 1,000 Dr Vehicle Cr Repair RM 1,000

15. CORRECTION OF ERRORS - Errors of Principle The journal entry is as follows: √ X General Journal Particulars Dr (RM) Cr (RM) Actual: Repair 1,000 Cash/Accounts payable 1,000 Errors: Vehicle 1,000 Cash/Accounts payable 1,000 Correction: Repair 1,000 Vehicle 1,000 Being correction of error – repairs to vehicles posted to Vehicles Account 1 st Step 2 nd Step 3 rd Step

16. CORRECTION OF ERRORS - Errors of Original Entry A wrong amount is recorded in a book of original entry or a document such as an invoice and subsequently posted to the ledger accounts EXAMPLE A purchase of RM665 from Paper Manufacturers Ltd has been entered in the Purchases Journal and posted to the ledger as RM656. Correct entry: Dr Purchases Cr Paper Mfg Ltd RM 665 Dr Paper Manufacturers Ltd Cr Purchases RM 665 1 st Step 2nd Step 3rd Step Error: Dr Purchases Cr Paper Mfg Ltd RM 656 Dr Paper Manufacturers Ltd Cr Purchases RM 656 Correction: Dr Purchases Cr Paper Mfg Ltd RM 9 Dr Paper Manufacturers Ltd Cr Repair RM 9

17. CORRECTION OF ERRORS - Errors of Original Entry The journal entry is as follows: General Journal Particulars Dr (RM) Cr (RM) Actual: Purchases 665 Paper Manufacturers Ltd 665 Errors: Purchases 656 Paper Manufacturers Ltd 656 Correction: Purchases 9 Paper Manufacturers Ltd 9 Being correction of error – purchases understated by RM 9 1 st Step 2 nd Step 3 rd Step

18. CORRECTION OF ERRORS - Compensating Errors EXAMPLE Rent revenue account is overcast by RM10, so as the Wages Account. . An error on the debit side is compensated by an error of equal amount on the credit side. Wages RM10 Rent revenue RM10 1 st Step 2nd Step 3rd Step Correction Dr Rent Revenue Account Cr Cash RM350 Dr Wages Account Cr Cash RM 600

19. CORRECTION OF ERRORS - Errors of Principle The journal entry is as follows: General Journal Particulars Dr (RM) Cr (RM) Actual: Errors: Correction: Rent revenue 10 Wages 10 Being correction of error – rent received and wages paid overstated by $10 each 1 st Step 2 nd Step 3 rd Step

20. X √ CORRECTION OF ERRORS - Complete Reversal of Entries When recording a transaction, the debit entry and the credit entry are reversed. EXAMPLE A payment of RM 700 to a creditor, Martin, was debited to the Cash account and credited to Martin’s Account. Correct entry: Dr Martin Cr Cash RM 700 Dr Cash Cr Martin RM 700 1 st Step 2nd Step 3rd Step Error: Dr Cash Cr Martin RM 700 Dr Martin Cr Cash RM 700 Correction: Dr Martin Cr Cash RM1,400 Dr Cash Cr Martin RM 1,400

21. CORRECTION OF ERRORS - Errors of Principle The journal entry is as follows: X X General Journal Particulars Dr (RM) Cr (RM) Actual: Martin 700 Cash 700 Errors: Cash 700 Martin 700 Correction: Martin 1400 Cash 1400 Being correction of error – payment to Martin debited to Cash Account and credited to Martin’s account 1 st Step 2 nd Step 3 rd Step

29. Errors Affecting TB Agreement and their Correction To correct the error... Suspense Account RM80 Linda RM80 Dr Linda Cr Dr Suspense Account Cr Difference in books RM80