This document discusses different types of accounting errors that can occur when keeping financial records. It describes errors that do not affect the trial balance totals, such as omissions, commissions, principles, compensating errors, original entries, and complete reversals. It also explains errors that do affect the trial balance totals, such as overcasting or undercasting accounts, single entries, and recording income as expenses or vice versa. When errors affect the trial balance, a suspense account must be used to balance the totals until the errors are found and corrected.

1. Errors

2. Introduction
Two types of error can be made by the book-keeper:
1. Errors which do not affect the trial balance totals
2. Errors which do affect the trial balance totals.

3. Tips
When correcting errors, ask three questions:
1. What entries have been made?
2. What entries should have been made?
3. What entries must be made to correct the error?

4. (1) Omission:
No double entry for the transaction was made in the
ledger, e.g. a sale on credit to L Grant for £900 is not
recorded in the ledger.
Correction:
Dr Cr
£ £
L Grant 900
Sales 900
Errors which do affect
the trial balance totals

5. (1) Commission:
An entry is made in the wrong personal account, e.g. a
purchase on credit from L Smith for £1200 is recorded in
the account of P Smith.
Correction:
Dr Cr
£ £
P Smith 1200
L Smith 1200
Errors which do not
affect the trial balance
totals

6. (2) Principle:
A fundamental error when an entry is made in the wrong
account, e.g. the purchase of a motor van, £15,000, is
recorded as a debit to motor expenses.
Correction:
Dr Cr
£ £
Motor vans 15,000
Motor expenses 15,000
Errors which do not
affect the trial balance
totals

7. (3) Compensating:
Errors are made in the ledger which will cancel each
other out, e.g. a business has overcast both the
purchases and sales accounts by the amount of £500.
Correction:
Dr Cr
£ £
Sales account 500
Purchases account 500
Errors which do not
affect the trial balance
totals

8. (4) Original entry:
A transaction is recorded as the incorrect amount in the
journals and posted to the ledger for the incorrect
amount, e.g. a sale on credit to L Patel for £600 is
recorded in the sales journal as £60 and posted to the
ledger.
Correction:
Dr Cr
£ £
L Patel 540
Sales account 540
Errors which do not
affect the trial balance
totals

9. (5) Complete reversal:
When both entries for a transaction are reversed, e.g. a
payment to R Taylor by cheque for £1000 was entered
Debit – bank account – £1000
Credit – R Taylor – £1000
Correction:
Dr Cr
£ £
R Taylor 2000
Bank 2000
Errors which do not
affect the trial balance
totals

10. Errors which do affect
the trial balance totals
Errors can be made which will result in
one side of the trial balance being different
from the other side.
The accounting equation does not hold
true.
A suspense account will be required.

11. The suspense account
If the trial balance does not agree, then a
suspense account should be opened for
the difference. The trial balance will now
be equal.
The errors must be found and corrected
through the suspense account.
The balance on the suspense account
must be cleared.

12. Example
Debits: £50,000 Credits: £49,000
Motor expenses of £1000 have been debited to
the motor expenses, but no credit entry has
been made in the cash book.
Suspense account
Cash book 1000 Bal b/d 1000
1000 1000

13. (2) Single entry:
Only one entry is made in the ledger, e.g. a payment by
cheque for postage stamps for £60 is recorded in the
cash book but no entry is made to postage expenses.
Correction:
Dr Cr
£ £
Postage expenses 60
Suspense account 60
Errors which do affect
the trial balance totals

14. Errors which do affect
the trial balance totals
(3) Overcasting and undercasting of accounts:
John Bridge
Bal b/d 500 Bank 2000
Sales 3000 Bal c/d 2500
3500 3500
Bal b/d 2500
cont’d

15. Continued
The account of John Bridge is over cast by £1000
because the balance brought down should be £1500, not
£2500. The debit side will be over cast by £1000 on the
trial balance.
A journal entry must be made to correct the error
Correction:
Dr Cr
£ £
Suspense account 1000
John Bridge 1000

16. (4) An income transaction could be recorded as an
expense or an expense as an income transaction, e.g.
discount allowed of £500 is posted to the credit of
discount received.
Correction:
Dr Cr
£ £
Discount allowed 500
Discount received 500
Suspense account 1000
Errors which do affect
the trial balance totals