Topic 4 Errors in Trial Balance PDF

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Topic 4: Errors in Trial Balance Errors in Trial Balance

Errors affecting the trial balance agreement. - Trial Balance is not balanced (total debit ≠ total credit)

Errors not affecting the trial balance agreement - Even though there are errors, the Trial Balance is still balanced (total debit = total credit)

Types of errors: 1)Single Entry This error occurs when only one aspect of a transaction is recorded. Eg: a RM200 cash received from accounts receivable was credited to Accounts Receivable Account but was not debited in the Cash Account.

Types of errors: 1)Error of Omission This error occurs when an entire transaction has not been recorded. There are no debit and credit entries at all.

2)Errors of Transposition This error occurs when figures are written in the order, that is debiting and crediting the accounts with different amounts. Eg: Cash sales of RM1,329 were credited to Sales Account as RM1,923. 3)Errors in Addition This error takes place when the debit or credit sides of an account are wrongly totalled. 4)Posting to the incorrect side of an account This error occurs when a transaction is posted to the same side of accounts. Eg: a RM1,000 paid to accounts payable is debited to Accounts Payable Account and also debited to the Cash Account. 5)Errors in the Trial Balance This error occurs when wrongly transferred account balances from ledger to the Trial Balance. Eg: Cash Account has a balance of RM2,200 but transferred to the Trial Balance as RM220.

2)Error of Commission This type of error occurs when the correct is posted into a wrong account of the same category. Eg: Supposed debited to AR-Ahmad Account but debited to AR-Amat Account. 3)Error of Principle This error occurs when an amount posted into the wrong account of a different category. Eg: repairs of a delivery van were debited to Delivery Van Account (asset) instead of Repairs Account (expense). 4)Complete Reversal of Entries This error arises when the amount and the accounts are correct, but each item is shown on the wrong side of the accounts. Eg: Paid to electricity expense RM60 cash, recorded as debited Cash Account and credited Electricity Account. 5)Compensating Errors An error on the debit side is compensated by an error of equal amount of the credit side. The error cancels out each other. 6)Error of Original Entry This is where errors were made in the journal. Eg: a cash sales of RM65 in the journal as RM56 and then posted to the ledger (debit and credit side) as RM56....