What is Error: 

        Generally error means mistakes. Mistakes made by an accountant while recording business transactions in the books of accounts. Unintentional omission or commission of amounts and accounts while recording the transactions is also known as an Error.

Types / Classification of Errors : 

     Errors may be classified under following four heads

1) Errors of principle

2) Errors of omission

3) Errors of commission

4) Compensating errors   


1) Errors of principle :

      If a transaction is not recorded according to the fundamental principles of  accounting and book keeping.  that types of errors called as an Error of Principle. It may relates to capital and revenue expenditure and Income.


 Example : 

        a) Wages paid for installation of Machinery debited to Wages account

        b) Payment of Salaries to Ramesh debited to Ramesh's Account

2) Errors of omission : 

         The word Omission makes it clear that transaction is omitted at the time of recording in the original book.


Types of errors of omission: 

There are two types of errors of omission.

     a) Complete omission: 
     
                    If record of a transaction totally ignored or omitted to be recorded in the original books of accounts it is known as an Error of Complete omission. It does not affect agreement of trial balance.

  Example:

  • Goods of $ 1000 worth purchased from Sam have not been recorded in the book. 


     b) Partial Omission:  

                  If record of a transaction is partly omitted to be recorded in original books or not posted to one account in the ledger this is known as error of partial omission. Error of Partial omission affects the agreement of a trial balance.

   Example:

  • Rent Paid $2000 recorded in cash book correctly but remained to be posted to Rent account. No journal entry required only Rent a/c should be debited by $2000.


3) Errors of commission

                 If a Transaction is recorded has been wrongly entered in the book of original entry or wrongly posted in the ledger it is known as error of commission. There are several reasons od errors of commission such as wrong recording, Wrong calculation, wrong amount, wrong posting wrong totaling, wrong balancing etc. This affects the agreement of trial balance.

     Example: 

  • Goods Sold to Anna for $5000 was entered in the purchase book
  • Paid Insurance $100 posted twice to Insurance Account 


4) Compensating errors   

                 A compensating error is one which is counterbalanced by any other error or errors. When one or more debit errors happens to equal one or more credit errors the error is said to be compensating error.

     Example: 

  • Purchase book is under cast by $ 100
  • Sales book is under cast by $ 100

         

Effects of Errors:  

       Some errors affect the agreement of the trial balance while some errors do not affect the agreement of the trial balance. Errors affect the financial position of the Business, it affects the net profit or net loss.  

9 comments:

  1. Nice post. I was checking constantly this blog and I’m impressed! Extremely useful info specially the last part I care for such information a lot. I was seeking this certain info for a long time. Thank you and good luck. buy ig likes $1

    ReplyDelete
  2. Haryana 10th Question Paper
    Haryana Board Secondary Examination will be Conducted in both Hindi and English Medium. we Request the Students to Check their Subject Wise Exam 2023 Date and Start their Preparation by Downloading the HBSE 10th Class Previous Paper Pdf. Actually, Haryana 10th Question Paper don’t Forget to refer the important Questions Subject Wise 2023 in order to get good marks in All the Subjects. Hence forth get the HBSE 10th Class Model Test Paper 2023 pdf along with the solutions from our page.Haryana Board Secondary Examination will be Conducted in both Hindi and English Medium.

    ReplyDelete
  3. Information that I read home window replacement boca raton fl
    on your blog was quite helpful. I'll make sure to keep everything in mind! I appreciate you.

    ReplyDelete
  4. This content is really helpful and easy to understand, Thank you for sharing!
    Women Gothic Clothing

    ReplyDelete
  5. The change is held for the toppled forms for the field. The schedule of the team and Picture windows for the fixtures. Ink is assured for the field. Dynamic is toppled for the used and durable themes for the citizens.

    ReplyDelete
  6. Canada travelers, make sure to explore the benefits of 캐나다여행자보험

    ReplyDelete
  7. I'm absolutely in love with my christmas phone case iphone 11 from Claspp. It's the ultimate holiday accessory, and their website made it easy to find the perfect match.

    ReplyDelete
  8. This comment has been removed by the author.

    ReplyDelete
  9. happy National Hot Chocolate Day
    ! What better way to celebrate than by indulging in a steaming cup of cocoa? The Holiday Hours Time is my go-to source for holiday dates, ensuring I never miss the chance to partake in delightful celebrations.

    ReplyDelete

See Also..