WHAT DO I DO IF I MADE A CARELESS MISTAKE IN MY MATHS PROBLEM SUM?
WHAT DOES MY TEACHER DO WHEN HE MARKS A QUESTION WRONGLY?
WHAT DOES THE CASHIER DO IF SHE GIVES ME
THE WRONG CHANGE?
WHAT DOES THE UNCLE AT THE GROCERY SHOP DO WHEN
HE ADDS UP WRONGLY FOR MY GROCERIES?
1. EXPLAIN & CORRECT ERRORS WHICH DO NOT AFFECT
THE AGREEMENT OF THE TRIAL BALANCE TOTALS.
2. EXPLAIN AND CORRECT ERRORS WHICH AFFECT
THE AGREEMENT OF THE TRAIL BALANCE TOTALS
BY USING A SUSPENSE ACCOUNT.
3. RE-CALCULATE PROFITS AFTER ERRORS HAVE BEEN
CORRECTED.
4. REVISE THE BALANCE SHEETS TO RECTIFY THE ERRORS.
Errors of omission
Errors of commission
Errors of principle
Errors of original entry
Compensating errors
Errors of omission of one
entry
Errors in name of customer/
supplier
Errors in account category
Errors in amount
Complete reversal of entries
Errors on debit side connected
with errors on credit side
Posting to the wrong side of an
account
When a transaction has been completely omitted from the books.
By making a double-entry to record the transaction.
Main
An entry has been posted to the wrong account of the same category.
To reverse the entry in the wrong account and to post the correct entry.
Main
An entry has been posted to the wrong account of a different category.
To reverse the entry in the wrong account and to post the correct entry.
Main
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.
To correct the difference in the correct and wrong amount accordingly.
Main
An error on the debit side is compensated by an error of equal amount
on the credit side.
To reverse the error on both debit and credit sides of the accounts
concerned.
Main
When recording a transaction, the debit and credit entries are reversed.
By making the necessary posting of an amount double the amount of the
original error.
Main
Forgetting to either debit or credit one side of a transaction.
By making the necessary posting which has been omitted against an
entry in the Suspense Account.
Main
Mistakes made in calculation.
To account for either the overcast or undercast of figures.
Main
The amount debited and the amount credited are different.
To account for either the overcast or undercast of figures accordingly.
Main
Causing one side of the ledger to be more than the other by twice the
value of the error.
To make the necessary adjustments against Suspense Account.
Main
A cash payment of $2,000 for purchases has been omitted
from the books.
Cash
Purchases Account
$
2,000
Cash Account
Main
Purchases
Journal entry
$
2,000
A sale of $1,000 to Carrefour has been posted to Cold Storage Causeway Point.
Sales
Cold Storage - Causeway Point
$
$
Carrefour
1,000
1,000
Carrefour
Main
$
Journal entry
Cold Storage Causeway Point
ERROR MADE
CORRECTION MADE
1,000
Repairs to vehicles amounting to $3,000 has been posted to
Vehicles Account.
Cash
Vehicles Account
$
Repairs
3,000
Repairs Account
Main
Journal entry
$
Vehicles
ERROR MADE
CORRECTION MADE
3,000
$
3,000
A purchase of $2,100 from Pokka Corporation Limited by
Carrefour has been entered in the Purchases Journal and posted
to the ledger as $2,010.
Purchases Account
$
Pokka Corporation Limited 2,010
Pokka Corporation Limited
90
Main
Journal entry
ERROR MADE
CORRECTION MADE
Pokka Corporation Limited
Purchases
Purchases
$
2,010
90
Rent received $340 is correctly debited to the Cash Account but
posted as $350 to Rent Revenue Account. Similarly, wages paid
a sum of $590, is correctly credited to the Cash Account but
posted as $600 to Wages Account.
Rent Revenue Account
Wages
Cash
Wages Account
$
Main
Journal entry
$
10
Cash
ERROR MADE
CORRECTION MADE
600
Rent received
$
350
$
10
A payment of $700 to a creditor, Carrefour, should be debited
to Carrefour’s account and credited to the Cash Account, but
the entries are reversed.
Cash Account
Carrefour
Carrefour
Carrefour
$
Main
Journal entry
$
700
Cash
ERROR MADE
CORRECTION MADE
1,400 Cash
$
1,400
$
700
A cash payment of $2,000 for purchases has been omitted
from the Purchases Account.
Cash
Main
Journal entry
CORRECTION MADE
Purchases
$
2,000
Suspense Account
$
Purchases
$
$
2,000
A purchase of $2,100 from Pokka Corporation Limited by
Carrefour has been entered in the Purchases Journal as $2,010.
The amount shown on the other account is correct.
Suspense
Purchases
$
90
$
Main
Journal entry
CORRECTION MADE
Suspense Account
$
Purchases
$
90
Rates paid $210 was entered correctly in the Cash Book but
wrongly entered as $120 in the Rates Account.
Suspense
Main
Journal entry
CORRECTION MADE
Rates Account
$
90
Suspense Account
$
Rates Account
$
$
90
Discount received $100 posted to the debit side of the Discount
Received Account.
Discount Received
Main
Journal entry
CORRECTION MADE
Suspense Account
$
200
Discount Received Account
$
Suspense Account
$
$
200
P.S. The suspense account would be self-balancing when all the errors
made are detected and corrected, otherwise, it would either have a
credit or debit balance when closed!
Correcting Net Profit Figure Errors made in the accounts
would affect the figures in our final accounts.
Errors that affect the Gross Profit and Net Profit figures
are items that are transferred to the Trading and Profit
and Loss Accounts ultimately.
E.g. Sales, Rent, Commission Received etc.
Errors of items found in the Balance Sheet will not affect
the profit figure, instead, they will overstate or
understate the assets and liabilities figures.
E.g. Furniture, motor vehicles, loan, bank overdraft etc.
Statement of Corrected Net Profit
$
Net Profit before COE
Add Expenses overcast
Revenue undercast
$
1,700
XX
XX
XX
XX
Less Expense undercast
Revenue overcast
Adjusted Net Profit
XX
XX
XX
XX
Note: Overcast means showing more than there actually is
Undercast means showing less than there actually is