Correction of errors

There are 2 types of errors:

 Errors not affecting trial balance
 Errors affecting trial balance
Errors not affecting trial balance, are errors that would still make the trial balance agree.
These includes:
 Error of Complete Omission
 Error of Principles
 Error of Commission
 Error of Duplication
 Error of Complete Reversal
 Error of Original Entry
 Error of Compensating
1. Error of complete omission:
This is where a transaction has been completely omitted from the books.
No double entry has been made in the books (No Debit & No Credit Entry)

To Correct: Complete the double entry

2. Error of Principles

This is where the wrong class of account has been used but having the same type of
balance.

Error: Asset has been treated as Expense (vice versa) both have debit balance
Or Liability has been treated as Income (vice versa) both have credit balance.

Class of account: Asset, Liability, Income and Expense

To correct:
If the wrong Account was Debited, Correct (Dr the Correct Account Cr the wrong account)
If the wrong Account was Credited, Correct: (Dr the wrong account Cr the Correct account)

3. Error of Commission

This is where the wrong name of account was used, but using the correct class of account.

Name of account- wages account (class: Expense)

To Correct:
If the wrong Account was Debited, Correct (Dr the Correct Account Cr the wrong account)
If the wrong Account was Credited, Correct: (Dr the wrong account Cr the Correct account)

4. Error of Duplication
It is where a transaction has been recorded twice in the books.
To correct: Reverse the double entry.
 5. Error of complete reversal

It is where the correct accounts were used, but by using the wrong double entry. Account to be
debited was in fact credited and account to be credited was in fact debited.

To correct: reverse the double entry by twice the amount.

1. To cancel the error
2. To correct the error.

6. Error of original entry

It is where the wrong amount was used, but correct double entry / accounts.

If wrong amount was used, the accounts would either be Overstated or Understated

If the account is Overstated:

To correct- Reverse the double entry by the difference (correct amount and wrong amount)

If the account is Understated:

To correct- complete the double entry by the difference (correct amount and wrong amount)

7. Compensating Error

It is where there are 2 errors, each cancelling each other. That is, an error on the debit side
cancelling another error in credit side with same amount.

Error affecting Trial balance

When there is an error affecting trial balance, same will not agree. This lead to the creation of
suspense account in order to make the trial balance agree.

Errors:

1. Single Entry- only one entry has been made (either only Debit entry or only Credit entry)
Complete the missing entry.
2. One account is either overstated or understated.
3. Wrong side in the correct account
4. Using one wrong account ( instead using discount allowed, discount received were used)

Correction of profits

The following steps should be followed:

1. Identify whether the item classified is an item of income statement ( income or expense)
2. If an Income item after correction was credited, profit will increase.
3. If an Income item after correction was debited, profit will decrease
4. If an Expense item after correction was debited, profit will decrease
5. If an Expense item after correction was credited, profit will increase

Note: the best way to correct an error is to eliminate the error then record the correct double entry