What are Accounting Errors Types? When keeping a company’s accounting, mistakes can be made, which can lead to mismatches in the accounts. Below we tell you what these errors consist of, what types exist and we show you some examples.‘Error’ means to act wrongly without an intention to do wrong. It means an unintentional mistake.
All Accounting Errors Types
(A) CLERICAL Accounting ERRORS
- ERRORS OF OMISSION
It means the error in which the transaction has been completely omitted from the records. Suppose goods are sold to Ali but no entry has been passed in the sales journal. I his type of error does not affect the agreement of the trial balance because both aspects of the entry have been missed. This type of error can only be deducted by careful checking.
- ERRORS OF COMMISSION
It means the recording of transaction in a wrong account of the same class. For example sold goods to A but wrongly debited to B’s account. This is the error of commission and will have no effect on the agreement of the trial balance, as there is no mistake of amount on any side.
Some of the errors of commission affect the agreement of the trial balance such as:- (a) Wrong amount posted to an account.
- Debit amount posted to credit.
- Omission to post an amount from original book to the ledger.
- COMPENSATORY ERRORS
Compensatory error means an error which is cancelled by an other error of same amount in the opposite direction.
EXAMPLE
An overcasting of an account by Rs.300 may be cancelled by undercasting of an other account to the same extent. So this error will not affect on the accuracy of the trial balance. <
- ERRORS OF DUPLICATION
If any transaction is recorded twice, it is known as error of duplication.
- REVERSAL ERROR
Every entry has two aspects. If debit account is credited and credit account is debited in the entry that is called the reversal error.
- TRIAL BALANCE ERROR
If in preparing the trial balance the debit balance is written on credit side or credit balance is written on debit side, it is known as trial balance error.
- ERROR OF AMOUNT
If wrong amounts are recorded in two aspects of entry then that is called error of amount.
Accounting Principles Errors.
- INCORRECT ALLOCATION
It means treating the capital expenditure as revenue or revenue expenditure as capital.
- OMISSION OF OUTSTANDING ASSETS AND
LIABILITIES
These errors occur where the outstanding expenses, assets and liabilities are ignored.
- CHECKING OF TOTALS
The auditor should check the totals of the accounts which are appeared in accounting books and records
- DIVIDE THE DIFFERENCE BY TWO
The auditor can also detect the error by dividing the difference by two. Then he should see that there is any amount of the same.
- INQUIRIES
The auditor should make general inquiries to find out the error of principle.
- SALES JOURNAL
The auditor should check the total of the sales journal Then he should compare this total with the amount stated in trial balance.
