Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: Correcting Errors
- Errors are not uncommon in accounting processes
- Often these errors are discovered and revealed at a later date than on the date they were made
- Errors should not be corrected by tearing/cancelling out the wrong number or similar methods
- Instead they are corrected by making Journal entries
- Examination and exercise questions will ask you to correct given errors by:
- Showing corrections by means of journal entries
- Showing the corrections in the double entry set of accounts, by posting these journal entries to the ledger accounts affected
- Take care to only do as much as you are asked to do and no more
- For example do not show double entry accounts when you are asked to show only journal entries
Entries to correct errors in the accounts
Error of omission
- For example the sale of goods, $125 to E Gore, has been completely omitted from the books. We must correct this by entering the sale in the books. The following Journal Entries and corresponding will correct this error:
| | | Journal/General Journal | | | |
| | Date | Details | DR | CR | |
| | 31 December | E Gore | 125 | | |
| | | Sales | | 125 | |
| | Being the record of Sales Invoice No: 134 which had been omitted from the books |
| | | | | | |
| | DR | Debtor's Ledger | | | CR |
| | | E Gore Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
31 December | Sales | 125 | | | | |
| | | | | | |
| | | General Ledger | | | |
| | | | | | |
Date | Details | Amount($) | Sales Account | Date | Details | Amount($) |
| | | | 31 December | E Gore | 125 |
Error of Commission
- A purchase of goods, $54 from C Sango, was entered in error in C Senge’s account. To correct this, the purchase must be cancelled out of C Senge’s account, and then entered where it should be in C Sango’s account. The entries required to correct this are as follows:
| | | Journal/General Journal | | | |
| | Date | Details | DR | CR | |
| | 31 December | C Senge | 54 | | |
| | | C Sango | | 54 | |
| | Being the record of Purchase Invoice No: 12 which had been entered into the wrong personal account |
| | | | | | |
| | DR | Creditor's Ledger | | | CR |
| | | C Senge Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
31 December | C Sango | 54 | | | | |
| | | | | | |
| | | C Sango Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
| | | | 31 December | C Senge | 54 |
Error of Principle
- The purchase of a machine, $200, is debited to the purchases account instead of being debited to
a machinery account. We therefore cancel the item out of the purchases account by crediting that
account. It is then entered where it should have been entered by debiting the machinery account. The following entries show the correction:
| | | Journal/General Journal | | | |
| | Date | Details | DR | CR | |
| | 31 December | Machinery Account | 200 | | |
| | | Purchases Account | | 200 | |
| | Correction of error: purchase of fixed asset debited to purchases account |
| | | | | | |
| | DR | General Ledger Ledger | | | CR |
| | | Machinery Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
31 December | Purchases | 200 | | | | |
| | | | | | |
| | | Purchases Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
| | | | 31 December | Machinery | 200 |
Compensating Errors
- The sales account is overcast by $250, as also is the wages account. The trial balance therefore still balances. This assumes that these are the only two errors found in the books. It is possible to have three or more compensating errors two one side and one error on another side.
| | | Journal/General Journal | | | |
| | Date | Details | DR | CR | |
| | 31 December | Sales Account | 250 | | |
| | | Wages Account | | 250 | |
| | Correction of overcasts of $250 each in the sales account and the
wages account which compensated for each other |
| | | | | | |
| | DR | General Ledger Ledger | | | CR |
| | | Sales Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
31 December | Wages | 250 | | | | |
| | | | | | |
| | | Wages Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
| | | | 31 December | Sales | 200 |
Error of original entry
- A sale of $82 to A Sando was entered in the books as $28. I means the Sales Account was understated by $54
now. The following entries will correct this error:
| | | Journal/General Journal | | | |
| | Date | Details | DR | CR | |
| | 31 December | A Sando Account | 54 | | |
| | | Sales Account | | 54 | |
| | Correction of error whereby sales were understated by $54 |
| | | | | | |
| | DR | Debtor's Ledger | | | CR |
| | | | | | |
| | | A Sando Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
31 December | Wages | 54 | | | | |
| | | | | | |
| | | General Ledger | | | |
| | | | | | |
| | | Sales Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
| | | | 31 December | Sales | 54 |
Complete reversal of entries
- A payment of cash of $45 to M Danda was entered on the receipts side of the Cash Book in error and credited to M Danda’s account. These errors are a little tricky to correct.
- First need to make entries to cancel out the error, Debit M Danda and Credit Cash with $45
- Then comes the actual entry that must have been made: Debit M Danda and Credit Cash with $45
- A shorthand way of recording this is to multiply the amounts recorded by two: Debit M Danda with $90 and Credit Cash with $90
| | | Journal/General Journal | | | |
| | Date | Details | DR | CR | |
| | 31 December | M Danda Account | 90 | | |
| | | Cash Account | | 90 | |
| | Payment of cash $90 debited to cash and credited to
M Danda in error Error now corrected |
| | | | | | |
| | DR | Cash Book | | | CR |
| | | | | | |
| | | Cash Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
| | | | 31 December | M Danda | 90 |
| | | | | | |
| | | Creditor's Ledger | | | |
| | | | | | |
| | | M Danda's Account | | | |
Date | Details | Amount($) | | Date | Details | Amount($) |
31 December | Cash | 90 | | | | |
NB
- Transposition errors are no for the most part no different from errors of original entries so the same entries will correct them
- We are assuming that the errors are discovered on 31 December so correcting entries are made on that day
- You can see an example of a worked question here
To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.