Cambridge as level correction of errors
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Correction of accounting errors for a Level or level under National , Edexcel and Cambridge Syllabuses Situations where errors take place: Two types of errors , Errors which are not revealed by the trial balance and errors which are revealed by the trial balance, errors of omission , commission , principle, original entry , compensating and complete reversal , suspense account , past papers
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Cambridge as level correction of errors
- 1. Correction of Errors 1 Accounting with Sanjaya Correction of Errors Sanjaya Jayasundara B.Sc.(Finance) Sp. University of Sri Jayewardenepura, Investment Advisor, International School Teacher
- 2. Correction of Errors 2 Accounting with Sanjaya Content Introduction. The situations where accounting errors take place. Type of accounting errors. Suspense Account Statements of revised/corrected profit Past paper questions. Short Note. Syllabus according to Cambridge AS Level 1.3 Reconciliation and verification • prepare ledger accounts and journal entries to correct errors using a suspense account and record the effects of these in the financial statements
- 3. Correction of Errors 3 Accounting with Sanjaya 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 4 Accounting with Sanjaya 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 5 Accounting with Sanjaya 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 6 Accounting with Sanjaya 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 7 Accounting with Sanjaya 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 8 Accounting with Sanjaya 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 9 Accounting with Sanjaya 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 10 Accounting with Sanjaya 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 11 Accounting with Sanjaya Past Paper Questions May/June 2020 – Variant 21
- 12. Correction of Errors 12 Accounting with Sanjaya
- 13. Correction of Errors 13 Accounting with Sanjaya May/June 2018 – Variant 23
- 14. Correction of Errors 14 Accounting with Sanjaya
- 15. Correction of Errors 15 Accounting with Sanjaya October/November 2016 – Variant 22
- 16. Correction of Errors 16 Accounting with Sanjaya All the best children…! I wish you an enjoyable learning session...! Sanjaya Jayasundara Like me on FB to get more updates: “Accounting with Sanjaya ” For Short Notes: Googles “Correction of errors by Sanjaya Jayasundara”