Errors-And-Journal-Entries Igcse Edexcel

Errors which do not affect a trial balance

Which errors do not affect the trial balance?

• There may be errors even though the totals in the trial balance are equal

• These errors might be spotted by other means

  • Control accounts

  • Bank reconciliation statements

• These errors cannot be ignored

  • They could affect the stated profit

  • They could affect the stated value of assets and liabilities

  • They could affect the balances related to other businesses

• The six types of errors which do not affect a trial balance are:

  • Error of omission

  • Error of original entry

  • Error of complete reversal

  • Error of commission

  • Error of principle

  • Compensating errors

How do I correct errors using journal entries?

• You can correct errors by making the appropriate entries into the ledger accounts

• The journal will be used as a book of original entry

• Enter the account that needs to be debited

  • It is conventional for debit entries to appear first

• Enter the account that needs to be credited

  • It is conventional to indent the details for credit entries

• Give a narrative for the journal entry

  • State “Correction of error”

  • Give a brief description of the error

Error of omission

What is an error of omission?

• An error of omission occurs when a transaction is not entered into any ledger accounts

  • The transaction is omitted

  • It is possible that the transaction was not entered into the books of original entry

• The transaction is not included in the total for the debits and the total for the credits

  • The totals will therefore balance

How do I correct an error of omission?

• Enter the transaction correctly into the ledger accounts

  • You essentially just need to make the entries as normal

• Make the journal entries

Error of original entry

What is an error of original entry?

• An error of original entry occurs when a transaction is entered into both of the ledger accounts using an incorrect amount

  • The same incorrect amount is entered into both the debit account and the credit account

  • It is possible that the amount of the transaction was entered incorrectly into the books of original entry

• The incorrect amount is included in the total for the debits and the total for the credits

  • The totals will therefore balance

How do I correct an error of original entry?

• Find the difference between the incorrect amount and the correct amount

• Enter the difference into both accounts

  • To increase an amount

    • Put the difference on the same side as the original entry

  • To decrease an amount

    • Put the difference on the opposite side to the original entry

Error of complete reversal

What is an error of complete reversal?

• An error of complete reversal occurs when a transaction is entered into the wrong sides of both of the correct ledger accounts

  • The account that was debited should have been credited

  • The account that was credited should have been debited

• The correct amount is included in the total for the debits and the total for the credits

  • The totals will therefore balance

How do I correct an error of complete reversal?

• Double the value of the transaction

  • This is because you need to apply the transaction twice

    • Once to undo the error

    • Once to make the correct entries

• Make the entries on the correct side

  • This will be the opposite side to where it was entered

Error of commission

What is an error of commission?

• An error of commission occurs when one entry for a transaction is entered into an incorrect account but the type of account is correct

  • A debit entry could have been entered into the wrong expense account

  • A transaction could have been entered into an account for the incorrect customer

  • A transaction could have been entered into an account for the incorrect supplier

• The correct amount is included in the total for the debits and the total for the credits

  • The totals will therefore balance

How do I correct an error of commission?

• Undo the entry in the incorrect account

  • This means making an equal entry on the opposite side of the account

• Make an entry in the correct account

Error of principle

What is an error of principle?

• An error of principle occurs when one entry for a transaction is entered into an incorrect account and the type of account is also incorrect

  • A transaction for an expense could have been entered into an asset account

• The correct amount is included in the total for the debits and the total for the credits

  • The totals will therefore balance

How do I co