Chapter 3 (Part 2) Trial Balance and Errors not Affecting Trial Balance.pdf

Trial balance and errors not affecting trial balance.

1. UNIT 3 –PART 2
THE TRIAL BALANCE
AND ERRORS

2. LEARNING OUTCOME
Students able to explain and differentiate correctly
errors that do not affect the trial balance.

3. CATEGORIES OF ERRORS
If the trial balance balances ( Total debits = Total
credits).
If the trial balance does not balance (Total debits =
Total credits)

4. ERRORS THAT OCCUR IF THE TRIAL
BALANCE BALANCES (NOT REVEALED BY
TRIAL BALANCE)
P Principle
O
Original entry
O
Omission
R
Reversal of entries
C
Commission
C
Compensating

5. 1) Errors of Principle
An entry has been posted the wrong account of a
different category.

6. Example
Office equipment purchased for $1,000 in cash has
been debited to an office expenses account.
Correct entry:
Wrong entry:
Dr Office Equipment $1000
Cr Cash $1000
Dr Office Expenses $1000
Cr Cash $1000

7. 2) Errors of Original Entry
The wrong amountis recorded in the books of
accounts compared to the original figure.

8. Example
A payment of $1,200 to a creditor, W. Rooney, has been
entered as both a debit and credit as $1,000.
Correct entry:
Wrong entry:
Dr W. Rooney $1200
Cr Bank $1200
Dr W. Rooney $1000
Cr Bank $1000

9. 3) Errors of Omission
A transaction has been completely omitted from the
accounts.

10. Example
A sale of $400 to John Wayne has been completely
omitted from the accounts.
Correct entry:
Wrong entry:
Dr John Wayne $400
Cr Sales $400
No entry

11. 4) Reversal of Entries
When recording a transaction, the debit and credit
entries are reversed.

12. Example
The purchase of goods on credit from M. Loki for $60
was entered on the debit side of M. Loki’s account and
the credit side of the purchases account.
Correct entry:
Wrong entry:
Dr Purchases $60
Cr M Loki $60
Dr M Loki $60
Cr Purchases $60

13. 5) Commission
An entry has been posted to the wrong account of the
same category.

14. Example
A purchase of goods from C.Rayne has been posted to
the credit side of C.Ryan’s account in error, amounting
to $500.
Correct entry:
Wrong entry:
Dr Purchases $500
Cr C Rayne $500
Dr Purchases $500
CrC Ryan $500

15. 6) Compensating Errors
An error on the debit side is compensated by an error
of equal amount on the credit side.

16. Example
The purchases account was undercast by $2,200, and
the sales account was also undercast by $2,200. The
correcting entries should be:
Correct entry:
Dr Purchases $3200
Cr Air Asia $3200
Dr Pizza Hut $5200
Cr Sales $5200
Wrong entry: Dr Purchases $1000
Cr Air Asia $3200
Dr Pizza Hut $5200
Cr Sales $3000

17. REFLECTION
Identify the type of errors (if the trial balance
balances) for each of these transactions:
1)Rent paid amounting $410 was not recorded in any
books.
2)Credit sales amounting $949 to Super Savers was
wrongly recorded into Super Seaversaccount.
3)Purchases on credit amounting $300 from Granada
was debited to drawings account .
4)Maintenance expenses amounting $1400 was debited
into the premises account.

18. 5)Mr. Galliano’s personal expenses was debited to the
sundry expenses account.
6)Wages paid was undercast by $66 and commission
received was also undercast by $66.
7)Purchases of stationery amounting $135 was recorded
as $153 in the books of account.
8)Carriage outwards $75 was debited into the motor
vehicles account.
9)Payment of cheque amounting $745 to Maryland was
debited into the Marry Brown account.
10)Payment of cheque amounting $1300 to Bonia was
debited into the bank account and credited into
Bonia’s account.