Chapter 26

Errors Not Affecting Trial

Balance Agreement
Error of omission
•A transaction is
completely omitted
from the books
 Error of omission
• Example:
Office furniture had been
purchased for $3,600 on credit
from Kowloon Co. . This
transaction had not been
recorded. The bookkeeper found
this error on Apr 11, 1996.
Effect on net
No effect
profit
Effect on FA understated
CL understated
balance sheet
Journal entry Dr Office Furniture
Cr Kowloon Co.
of correction
 Journal
Date Dr Cr
Particulars
1996 $ $
11/4 Office Furniture 3,600
Kowloon Co. 3,600
Being office furniture purchased
from Kowloon Co. not recorded
Error of commission
• A transaction is
entered in a wrong
account of the same
class
Error of commission
• Example:
Goods $20,000 sold on credit to
Mr. Chan had been entered in
the account of Mr. Chen. The
bookkeeper found this error on
May 1, 1996.
Effect on net
No effect
profit
Effect on
No effect
balance sheet
Journal entry Dr Mr. Chan
of correction Cr Mr. Chen
 Journal
Date Dr Cr
Particulars
1996 $ $
1/5 Mr. Chan 20,000
Mr. Chen 20,000
Being goods sold to Mr. Chan entered
in the account of Mr. Chen
Error of principle
• A transaction is
entered in an account
of wrong class
 Error of principle
• Example:
The payment of an invoice $36,000 in
respect of repairing the motor vehicle as
to prolong the life of that motor vehicle
had been debited to the repairs expenses
account. The bookkeeper found this error
on Jul 26, 1996.
Effect on net
Understated
profit
Effect on
FA understated
balance sheet
Journal entry Dr Motor Vehicle
Cr Repairs Expenses
of correction
 Journal
Date Dr Cr
Particulars
1996 $ $
26/7 Motor Vehicle 36,000
Repairs Expenses 36,000
Being cost of motor vehicle wrongly
debited to the repairs expenses account
Error of original entry

• Wrong amount is
entered in the correct
side of the account
Error of original entry
• Example:
Goods $890 sold on credit to
Aberdeen Co. had been entered
in the books as $980. The
bookkeeper found this error on
Jun 7, 1996.
Effect on net
Overstated
profit
Effect on
CA overstated
balance sheet
Journal entry Dr Sales
Cr Aberdeen Co.
of correction
 Journal
Date Dr Cr
Particulars
1996 $ $
7/6 Sales 90
Aberdeen Co. 90
Being goods $890 sold entered as $980
Error of duplication

•A transaction is
entered twice in the
books
Error of duplication
• Example:
Cheque $3,000 received from
Kwun Tong Co. had been
entered twice in the cash book.
The bookkeeper found this error
on Aug 18, 1996.
Effect on net
No effect
profit
Effect on
No effect
balance sheet
Journal entry Dr Kwun Tong Co.
Cr Cash at Bank
of correction
 Journal
Date Dr Cr
Particulars
1996 $ $
18/8 Kwun Tong Co. 3,000
Cash at Bank 3,000
Being cheque received from Kwun
Tong Co. entered twice in the Cash
Book
Compensating error

•One error cancels

the effect of another
error coincidently
Compensating error
• Example:
The telephone account was
overstated by $100 while the
sales account was overstated by
$100, too. The bookkeeper found
this error on Sep 16, 1996.
Effect on net
No effect
profit
Effect on
No effect
balance sheet
Journal entry Dr Sales
Cr Telephone Expenses
of correction
 Journal
Date Dr Cr
Particulars
1996 $ $
16/9 Sales 100
Telephone Expenses 100
Being telephone account and sales
account both overstated by $100
 Reversal of entries
•Double entry has been
made, correct in amount
but wrongly posted on
the reversed sides of the
accounts
Reversal of entries
• Example:
Goods purchased for cash $2,600
had been entered in the debit side of
the cash in hand account and posted
to the credit side of the purchases
account. The bookkeeper found this
error on Nov 11, 1996.
Effect on net
Overstated
profit
Effect on
CA overstated
balance sheet
Journal entry Dr Purchases
Cr Cash in Hand
of correction
 Journal
Date Dr Cr
Particulars
1996 $ $
11/11 Purchases 5,200
Cash in Hand 5,200
Being purchases entered in the
wrong sides of both accounts