7. Corrections of Errors

Question 1

List the six errors not disclosed by preparation of trial balance.

Answer 1

1. Error of Omission 2. Error of Commission
2. Error of Principle 4. Error of Original Entries
3. Compensating Errors
4. Error of Complete Reversal Entries

Question 2

Describe error of omission.

Answer 2

Error of Omission is one where the transaction took place but entries were not made in the books.

Question 3

Describe error of commission

Answer 3

Error of Commission is one where the entry is made in the wrong account and this wrong account is of the same class as the correct account. e.g. payment of rent recorded in insurance account (both rent and insurance are expense accounts)

Question 4

Describe error of principle

Answer 4

Error of Principle is one where the entry is made in the wrong account and this wrong account is of the different class from the correct account. e.g. payment of rent recorded in premises account (rent is an expense, premises is an asset)

Question 5

Describe error of original entries

Answer 5

Error of original entries is one where the amount of the transaction was recorded wrongly in both debit and credit entries. e.g. Payment of rent $500 was recorded as $550.

Question 6

Describe compensating errors

Answer 6

Two errors made and these errors offset one another. e.g. sales revenue (cr amt) and rent expense (dr amt) were overcast by $40.

Question 7

Describe error of complete reversal entries

Answer 7

Double entries were reversed - debit recorded as credit and credit recorded as debit.
e.g. Rent paid was credited to rent account and debited to cash at bank account.

Question 8

Identify the following errors and give the double entries to correct the errors

a) drawings of inventory $140 was omitted.
b) credit sales of $145 was recorded as $154
c) repairs to motor van $220 was debited to motor van account.

Answer 8

a) Error of Omission
Dr Drawings $140; Cr Inventory $140
b) Error of Original Entries
Dr Sales revenue $9; Cr Trade receivable $9
c) Error of Principle
Dr Repair expense $220; Cr Motor Van $220

Question 9

Identify the following errors and give the double entries to correct the errors

a) sales revenue and inventory were overstated by $500.
b) rent expense and interest income were understated by $150
c) payment for insurance $60 was debited to interest account.

Answer 9

a) compensating errors
Dr Sales Revenue $500; Cr Inventory $500
b) Compensating errors
Dr Rent Expense $150; Cr Interest income $150
c) Error of Commission
Dr Insurance Expense $60; Cr Interest expense $60

Question 10

Identify the following errors and give the double entries to correct the errors

a) drawings of inventory $300 was debited to cost of sales.
b) payment to Poh $320 was debited to Soh’s a/c
c) sales $1500 to Sunny was recorded in Sonny’s a/c.

Answer 10

a) Error of Principle
    Dr Drawing $300;  Cr Cost of Sales $300
b) Error of Commission
    Dr Poh $320;  Cr Soh $320
c) Error of Commission
    Dr Sunny $1 500; Cr Sonny $1 500

Question 11

Identify the following errors and give the double entries to correct the errors

a) Purchase of office equipment $1 200 was debited to office furniture a/c
b) Purchase of stationery $300 was debited to inventory a/c
c) Installation cost of new machinery $600 was debited to machinery expense a/c

Answer 11

a) Error of Commission
Dr Office equipment $1 200; Cr Office furniture $1 200
b) Error of Commission
Dr Stationery $300; Cr Inventory $300
c) Error of Principle
Dr Machinery $600; Cr Machinery expense $600

Question 12

Identify the following errors and give the double entries to correct the errors

a) Payment to trade payable Winnie $670 to settle debt of $700 was not recorded
b) Rent paid $880 was recorded as $808
c) Depreciation on equipment $1 200 was recorded as $120 in the books.

Answer 12

a) Error of Omission
    Dr Trade payable Winnie $700; 
        Cr Cash at Bank $670
         Cr Discount received $30
b) Error of Original Entries
    Dr Rent Expense $72;  Cr Cash at Bank $72
c) Error of Original Entries
    Dr Depreciation $1 080; 
    Cr Accumulated Depreciation $1 080

Question 13

Identify the following errors and give the double entries to correct the errors

a) Invoice issued $560 was debited to sales revenue and credited to trade receivable.
b) Interest paid $140 was debited to cash at bank and credited to interest expense a/c.
c) Credit note issued to Lim $62 was recorded as $26

Answer 13

a) Error of Complete Reversal Entries
    Dr Trade receivable $1120
        Cr Sales revenue  $1120
b) Error of Complete Reversal Entries
    Dr Interest expense $280
         Cr Cash at Bank   $280
c) Error of Original Entries
    Dr Sales Returns  $36
         Cr Trade receivable $36

Question 14

State how the following errors affect gross profit and profit for the year:

a) sales revenue was understated by $500
b) motor van was overstated by $15 000
c) inventory was understated by $400
d) sales returns was overstated by $50
e) Interest expense was understated by $50
f) discount received was overstated by $40

Answer 14

a) sales revenue was understated by $500
BOTH GP AND P UNDERSTATED BY $500
b) motor van was overstated by $15 000
NO EFFECT ON GP AND P
c) inventory was understated by $400
NO EFFECT ON GP AND P
d) sales returns was overstated by $50
BOTH GP AND P UNDERSTATED BY $50
e) Interest expense was understated by $50
GP NO EFFECT; P OVERSTATED BY $50
f) discount received was overstated by $40
GP NO EFFECT; P OVERSTATED BY $40