Theory question 103
Correction of Errors and Suspense Account3. Explain the following errors giving an example of each (a) Principle; (b) Compensation; (c) Commission (d) Complete reversal of entries; (e) Omission.
Show the model answer
(a) Error of principle: an entry made in the wrong class of account, e.g. repairs to a machine debited to the machinery account instead of repairs account.
(b) Compensating errors: two or more errors that cancel each other out, e.g. sales account overcast by N500 and purchases account overcast by N500.
(c) Error of commission: correct amount entered in the wrong account of the same class, e.g. a credit sale to Taiye debited to Tayo's account.
(d) Complete reversal of entries: the correct accounts are used but debit and credit are swapped, e.g. a cheque paid to Kweku Mensah debited to bank and credited to Kweku Mensah.
(e) Error of omission: a transaction left out of the books entirely, e.g. a purchase of furniture for N1,000 not recorded at all.
None of these errors affects the agreement of the trial balance.
Give one short example for each type of error.