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Errors in Accounting

Updated on February 06, 2014

The trial balance is prepared to check the arithmetical accuracy of accounts. If the trial balance does not tally, it implies that there are arithmetical errors in the accounts which require location, detection and rectification thereof. Even if the trial balance tallies, there may still exist some errors. There are two types of errors:

  1. Errors which are not revealed by the trial balance, and
  2. Errors which are revealed by the trial balance.

1. Errors may happen at any of the following stages of the accounting cycle

At Recording Stage

  • Errors of principle
  • Errors of omission
  • Errors of commission

At Posting Stage

Error of omission

  • Complete
  • Partial

Error of commission

  • Posting to wrong account
  • Posting on the wrong side
  • Posting of wrong amount

At Balancing Stage

  • Wrong totaling
  • Wrong balancing

Preparation of Trial Balance

Error of Omission

Error of Commission

  • Taking wrong amount
  • Taking wrong account
  • Taking to the wrong side

2. Errors can be classified into the following four categories on the basis of the nature of errors and explained here under

  1. Errors of commission
  2. Errors of omission
  3. Errors of principle
  4. Compensating (offsetting) errors
  5. Errors of Duplication

Errors of Commission

These errors by definition are of clerical nature. These errors may be committed at the time of recording and/or posting. At the time of recording, the wrong amount may be recorded in journal which will be carried throughout. Such errors will not affect the agreement of the trial balance. These errors may also be committed at the time of posting, by way of posting wrong amount, to the wrong side of an account or in the wrong account. The errors resulting in posting to wrong account will not affect agreement of trial balance, whereas, other errors of posting will resulting disagreement of trial balance.

For example, an amount of Rs. 10,000 received from customer (Debtor) is correctly recorded on the debit side of the cash book but while posting, the customer's account is credited with Rs. 1,000. This is an error, which is committed at the time of posting, by posting wrong amount to the account. This will result in disagreement of trial balance, since, the credit total of the trail balance will be short by Rs. 9,000.

Errors of Omission

The errors of omission may be committed at the time of recording the transaction in the books of original entry or while posting to the ledger. An omission may be complete or partial. Such errors are known as errors of omission.

For example, Machinery purchased for Rs. 50,000 by issuing a cheque is recorded first in the credit side of cash book, in the bank column. Suppose it is not posted to the debit of machinery account, it is an error of partial omission. The trial balance will not tally. Suppose the transaction is not entered in the cash book and hence ignored completely, this is a case of complete omission. It means as if the transaction has not taken place at all. It will not affect the trial balance and hence the trial balance will tally. This is true only in case of complete omission.

Errors of Principle

Accounting entries are recorded as per the generally accepted accounting principles. If any of these principles are violated or ignored, errors resulting from such violations are known as errors of principle. As an illustration, Periodicity principle requires maintaining proper distinction between capital and revenue items. An error of principle may occur due to incorrect classification of expenditure or receipts between capital and revenue. This is very important because it will have an impact on financial statements. It may lead to under/over stating of income or assets or liabilities, etc.

For example, amount spent on additions to the buildings should be treated as capital expenditure and must be debited to the asset account. Instead, if this amount is debited to maintenance and repairs account, it is treated as a revenue expense. This is an error of principle. Since instead of asset account, i.e. buildings, the maintenance and repairs account (expense) is debited, the trial balance will still tally but would not be correct as per generally accepted accounting principles.

Such errors are not disclosed by the trial balance. This will result in understating of income due to extra charge under maintenance and repairs account and understating the value of buildings in the balance sheet.

Compensating Errors

When two or more errors are committed in such a way that the net effect of these errors on the debits and credits of accounts is nil, such errors are called compensating errors. They do not affect the tallying of the trial balance.

For example, In a credit sale transaction, the sales account is credited in excess by say, Rs.5,000 and similarly the suppliers account in case of a credit purchase is understated by Rs.5,000, this is a case of two errors compensating for each others effect. It is to be noted that extra credit to the sales account is offset by lower credit to the creditor's account, both being credit balance. Since, one plus is set off by the other minus, the net effect of these two errors being of compensating nature and do not affect the agreement of trial balance.

Errors of Duplication

Such errors arise when an entry in a book of original entry has been made twice and has also been posted twice.

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    • profile image

      Muhammad Mushtaq 6 years ago

      That is very informative and supportive especially for the students and also for the accounting professionals.I am very thankful.

      Best Regards

      Muhammad Mushataq

    • profile image

      Ann 6 years ago

      Hi I received A cheque I wrote the receipts on said day but I deposit cheque 2 day after. How I am Torecored in the cash book

    • profile image

      waweru 6 years ago

      Thank you a lot. You really helped me.

    • profile image

      alok 6 years ago

      very contents.....thank u

    • profile image

      mufid 6 years ago

      thank u so much

    • profile image

      Ayesha  6 years ago

      hi please help me what is rectification in Accounting??And how I do this??

    • profile image

      Jema 6 years ago

      thanks a lot it really help me

    • profile image

      Johno 6 years ago

      How about Transitional Errors? The reversal of digits. These are not covered.

    • profile image

      Madhu 5 years ago

      I have posted an amount for a wrong AP Supplier. As same as I have posted the same amount for right supplier. I need to recorrect the record of Ap clearing. Ex; 500Aed have posted to aramex it should Oasis pure water. But I have posted AED500 for Oasis pure water also. I need to pass a G.Entry for the Aramex. Pls Help me asap.

    • profile image

      Zeeshan Aslam 5 years ago

      This is a very wonderful and useful information special for students.

    • profile image

      nishanthi 5 years ago

      it is very much useful for the students

    • profile image

      cool pakistani 5 years ago

      thanks a bunch it really helped us....

    • profile image

      ikotot 5 years ago

      thank for my revision classes and staff development

    • profile image

      Selvan007 5 years ago

      It is really super and helpful for me......

    • profile image

      Damsel 5 years ago

      Please help me with the factors that does not affect trail balance.

    • profile image

      shariq siddiqui 5 years ago

      any body want's to ask any question regarding accounting please ask it from me. My email address is "shariqcambridge@yahoo.com". Feel free to contact me as am a Cambridge teacher.

    • profile image

      omuse mercy akware 5 years ago

      it is good but i would like you to be giving us with examples.

    • profile image

      Priya 5 years ago

      Please help me in rectification of errors. I m not understanding anythng.

    • profile image

      abhi 5 years ago

      very helpful...

    • profile image

      rashad pkm 5 years ago

      This is too much informative..,

    • profile image

      Gillian 5 years ago

      Thank u for explaining the different types of errors. It has helped me to understand them more clearly

    • profile image

      Nompumelelo 5 years ago

      Please explain to me how do you write off a debtor if he or she's not paying?

    • profile image

      theking2020 5 years ago

      Awesome article on Errors made in Accounting voted awesome, would love your feedback in my articles

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    • profile image

      Kemigisa JB 5 years ago

      Thanks for the information provided to us. Everything is clear and easy to understand.

    • profile image

      Shamraix 5 years ago

      Very Informative

    • profile image

      Sandeep 5 years ago

      These errors are very helpful for me because all errors are there in this side

    • profile image

      Dinatu smith 5 years ago

      Thanks 4 dis wonderful info..it realy helped me

    • profile image

      Jeida pinkett 4 years ago

      Thanx for this info

    • profile image

      Frempongmaa 4 years ago

      Thanks for yr information.Infact u have made de topic interesting 2 me.

    • profile image

      Hadijah 4 years ago

      thank i have really liked the lesson but you have not given us solutions to the error of commission.more especially when you post a wrong amount on somes ones account.

    • profile image

      Nembaware Rumbie 4 years ago

      very informative................

    • profile image

      wozhie 4 years ago

      merci... it really is helping me, thank you for your info

    • profile image

      Guest 4 years ago

      Very informative....Thanks

    • profile image

      magda sam 4 years ago

      wow it's realy wonderful it help me a lot and i got good scores thanks

    • profile image

      Anupama Kumari 4 years ago

      Thanks !! It was indeed quite informative

    • profile image

      ISAAC 4 years ago

      So educative go on please...

    • profile image

      yvette 4 years ago

      how about errors in reconciliation?

    • profile image

      yayo 4 years ago

      if after many attempts, you are unable to correct an error that has been

      made what should you do????

    • profile image

      Indira 4 years ago

      thank you

    • profile image

      ajay kumar 4 years ago

      it is easy to understand thanks allot

    • profile image

      Nurraddeen Abba 4 years ago

      Please, What is errors of Accounting in the Business?

    • profile image

      4 years ago

      do you want me to explain errors in accouting?

    • profile image

      vaishnavi 4 years ago

      it is clear and easy to understand

    • profile image

      Beeshal 4 years ago

      it makes us easy to understand the related topic.

    • profile image

      Aashita 4 years ago

      Its very easy to understand. It is make my presentation best. Thank you very much.

    • profile image

      Anku Richard Effe 3 years ago

      Well explained.

    • profile image

      Jaanvi 3 years ago

      THANK YOU VERY MUCH .

    • profile image

      oluwadoyinsayemi 2 years ago

      thank you very much for helping out am greatful

    • profile image

      bhuvi 18 months ago

      It is very useful but i could not understand in journal

    • profile image

      mumleaxia 18 months ago

      Thanks for writing this blog and sharing it with all the world. I would like to know how you can go for reading through your rss blog. Please let me know if feasible.

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