cwork 4

31

Upload: moya-gail

Post on 19-May-2015

111 views

Category:

Economy & Finance


0 download

TRANSCRIPT

  • 1. Hellostudents!I am PinocchioTodays lesson is aboutthe Errors not affecting theTrial Balance.

2. At the end of this lesson youshould be able to:Define and explain the different types oferrors not affecting the trial balance. Correct errors that are not revealed by thetrial balance.Distinguished between the different types oferrors that may arise. 3. From here on, my friends willtell you all about thedifferent types of errors 4. IntroductionErrors Game 5. The trial balance process does not detect everyerror that could be made in an accountingsystem. You can produce a Trial Balance wherethe totals agree, but you make a wrong debit andcredit entry for the wrong amount, or record thedebit and credit entry in the wrong account.These mistakes are classified as Six (6) types oferror not revealed by a Trial Balance. Each errorhas to be corrected by making journal entrieswhich are then posted to the ledger accounts. 6. CommissionComplete reversal CompensationOriginal entryPrincipleOmissionErrors of 7. This type of error is where atransaction is completelyomitted from the books (sales,purchases, return inwards andreturn outwards journals). 8. EXAMPES OF ERRORS OF OMISSIONWe sold $100 goods to Mr. Bryan, but didnot enter it in either the sales account orMr. Bryans personal account.NB. The trial balance would still bebalanced.Extra Lesson 9. ERRORS OFCOMMISSIONThis type of errortends to occurwhen the correctamount is enteredbut in the wrongaccount. 10. Extra LessonEXAMPLE OF THE ERROR OFCOMMISIONWhere the sale of goodsamounting to $350 to M. Kellyis entered in the books of N.Kelly.NB: the trail balance will stillbe balanced. 11. ERRORS OF PRINCIPLEWhere an item isentered in the wrongclass of account. 12. Example of error ofprinciplePurchase of a fixed asset,such as van is debited toan expense account suchas motor expensesExtra Lesson 13. This iswhereerrorscanceleachotherCompensating Error 14. Example of compensating error: Rohans a/c is debited by $2500 while it was to be debitedby $3500 and Mohans a/c is debited by $3500 while thesame was to be debited by $2500. Thus excess debit ofMohans a/c by $1000 is compensated by short credit ofRohans a/c by $1000. As the debit amount and the creditamount are equalised, such errors do not affect theagreement of Trial Balance, but the fact remains that thereis still an error. There is an overstatement of $1,000 each in the Sales a/cand Purchases a/c which compensated for each other. 15. This is where the originalfigure is incorrect, yet thedouble entry is correctlydone using the incorrectfigure. 16. EXAMPLE OF ORIGINALENTRYWhere a sale should have totalled $230 butan error is made in calculating the total onthe sales invoice. If it were calculated as$320, and $320 were credited as sales and$320 were debited to the personal accountof the customer.NB: the trial balance would still be balanced.Extra Lesson 17. This is where the correctaccounts are used but each itemis shown on the wrong side ofthe account. 18. We had paid a cheque to H. Henryfor $100, the double entry ofwhich should be debit H. Henry$100, credit bank $100. in error itis debit bank $100 and credit H.Henry $100NB: the trial balance still agrees.EXAMPLES OF COMPLETE REVERSALExtra Lesson 19. Play True or False errors gameand test yourself 20. To theHelp 21. Read the question then click on the True orFalse button.If the answer is correct you will move to the nextquestionIf your answer is incorrect then you will have tostart all over againThe aim is to get all six questions correct withoutrestarting.Beware, the night forest is dangerous! 22. Error of completereversal is where theaccount that shouldhave been debited iscredited in error andthe account thatshould have beencredited id debited.TrueFalse 23. Error ofcompletion iswhere two ormore errorscancel eachother outTrueFalse 24. Error of originalentry is where anitem is entered, butboth debit andcredit entries are ofthe same incorrectamountTrueFalse 25. Error of Principle iswhere a correctamount is entered, butin the wrong personsaccountTrueFalse 26. Error ofomission iswhere atransaction isnot entered inthe books atallTrueFalse 27. commission isWhere a debitor creditentry is madein the wrongtype ofaccountTru Fals