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Lesson 59

Correction of Errors

Accounting

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By the end of this Lesson

You will

1. Mark the homework ..Sheet 33 Q’s 2 & 3

2. Learn how to correct errors (6 types) that do not prevent the trial balance from agreeing

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First ..mark your work and hand in

Homework answers given over the next 4

slides

Give a tick for each correct entry…add ticks to give total for each question

Careful marking leads to perfect answers and outstanding exam results ….go for it!

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Correction of Errors…Top Tip

Even if you are asked to do the correcting double entry in the General Journal ..always work your answer out in ledger form first!

3 Stage Method1 Show the entries that have been done2 Identify the mistake3 Correct the mistake with a double entry

Together we will work through theH Sagrott question

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Business of K Sagrott…(a)

Bank

D McDuff 28

D McNab

Bank 28 D McDuff 28

D McDuffD McNab 28

General Journal

D McDuff Dr 28

D McNab 28

Being correction of error of commission

Working …you can abbreviate

Answer

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Business of K Sagrott…(b)

Bank

Office furniture 65

Office Expenses

Bank 65

Off furniture 65

Office furnitureOffice Expenses 65

General Journal

Office furniture Dr 65Office expenses 65

Being correction of error of principle

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Business of H Sagrott…(c)

Discount Received

Sundries 10

Discount Allowed

Discount All 10

Disc Rec 10

General Journal

Discount allow Dr 10Discount received 10

Being correction of error of commission

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Stop off at your Reference PointYou will need to know the 6 types of error not affecting the trial

balance

1. Error of commission

Failure to do one’s job properly because accounts with similar names were mixed up

2. Error of principle

Lack of understanding of how to do accounts properly

3. Original error Mistake made in a book of original entry

4. Reversal Entire double entry the wrong way round

5. Compensating Two unrelated mistakes that by chance cancel each other

6. Omission Complete double entry totally missed out

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Question 3 A Smythe

Save time by abbreviating on working accounts

General Journal M Ltd

PurchM Ltd 1 600

Purch 1 600

M Ltd 1 600

Pch 1 600

Jn 30 Machinery Ltd 1600

Purchases 1600Being correction of error of principle

BankD Gor ?

D Gor ?

Bank ?

Dis RecD Gor 7-50

DR 7-50D Rec 7-50

D Gor7-50

Jn 30 Disc Rec 7-50

D Gorrie 7-50

Being correction of discount disallowed

Dep on M

Ma 80

FittingsDep 80M 80

MachineryFit 80

Jn 30 Fittings 80

Machinery 80

Being correction of error of commission

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Now ..do Q4 in your book

Even if you are asked to do the correcting double entry in the General Journal ..always work your answer out in ledger form first!

3 Stage Method1 Show the entries that have been done2 Identify the mistake3 Correct the mistake with a double entry

You should be able to do Q4 inside 10 minutes ..without cutting corners!

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Big Picture on Correction of Errors

Remember the 2 partsErrors that do prevent the trial balance totals from agreeing

Errors that have NO EFFECT on the agreement of the trial balance

So We will now move on to

Done this one

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If the Trial Balance does not agree

Make the trial balance agree by creating a suspense account

Trial Balance of D Beckham at 30 April 2001

Dr Cr

Capital 20Sales 30Purchases 80Rent 6Premises 14

100

Suspense 50

Suspense Account

Bal b/d 50

In the first few days of May the error was found (Purchases Day Book was overcast by

£50)

So if PDB was too big by £50 this bigger figure would have been posted to Purchases Account

Crediting Purchases Account with £50 will correct purchases and debiting suspense with £50 will clear the suspense

Purchases 50

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Sheet 34 Question 1 ..A Baynes

Suspense account

Balance b/d 39

M Lacey account

Suspense 39

M Lacey 39General Journal

M Lacey Dr 39

Suspense 39

Being correction of failure to post to creditors account

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Homework

For next Lesson

From worksheet 33 do questions 5 and 6

From worksheet 34 do questions 2 and 3

please, always stick the question into your book

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Summary

E X P L A I N T O Y O U R P A R T N E R

1. Name and explain the 6 types of error that do not prevent the TB from agreeing

2. What is the purpose of a suspense account

3. Why are accountants only happy when the suspense account has been cleared?

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