FINANCIAL ACC 101

CORRECTION OF ERRORS

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In preparing a Trial Balance the both sides must be equal where by one side is greater than the other, it means there is an error. Errors must be corrected in two ways.

# Errors that don't affect the agreement of the Trial Balance.

# Errors that will affect the agreement of the Trial Balance.

SOME ERRORS THAT CAN OCCUR IN TRIAL BALANCE:

1. Error of Original Entries- This occurs when a wrong amount is entered in the debit and credit side. For Example- Sales of N101 to Ayo must be entered in the account as N201.

2. Error of Omission- This occurs when a Transaction is totally omitted from the debit and credit side of the account.

3. Error of Commission- This occurs when a transaction is entered in a wrong person's account. For Example- Purchases of Goods of N70 from Martin was entered in Michael's

Account.

4. Error of Principle- This occurs when transaction on are entered in a wrong class of account. For Example- Payment of N60 for Motor Expenses was entered in Motor Van Account.

5. Compensating Error- This occurs when errors of the same amount are posted to the two sides of the ledger, therefore they cancel out each other.

6. Complete Reversal of Entries- This occurs when a double entry of a transaction is reversed, the account to be debited has been credited and the amount that ought to be credited is debited.

Procedures to Follow when Correcting the Errors:

1. Identification of the Types of Error.

2. Identification of the Two Accounts Involved.

3. Interpretation of the Error in the Ledger.

4. Preparation of Journal for Effective Correction.

ILLUSTRATION:  Show the Journal Entries necessary to correct the following errors

1. Sales of Motor Van N900 had been entered in the Sales Account.

a. Error of Principle

b. Motor Van A/c & Sales A/c

c. Demonstration in the Ledger

Dr                          Motor Van A/c                                Cr
Date	Particulars	Amount	Date	Particulars	Amount
				No Entries

Dr                                         Sales A/c                        Cr
Date	Particulars	Amount	Date	Particulars	Amount
	Motor Van	N900

d. Correction in Journal

Motor Van A/c- Credit Side

Sales A/c- Debit Side.

2. Sales from Mr Ogundeji N600 was completely omitted from the book.

a. Error of Omission

b. Mr Ogundeji's A/c & Sales A/c

c. Demonstration in Ledger

Dr                                  Mr Ogundeji's A/c                     Cr
Date	Particulars	Amount	Date	Particulars	Amount
				No Entries

Dr                                         Sales A/c                          Cr
Date	Particulars	Amount	Date	Particulars	Amount
	No Entries

d. Correction in Journal

Mr Ogundeji's A/c- Credit Side

Sales A/c- Debit Side.

3. Goods purchased from Ibrahim N40 was entered in Abraham's Account.

a. Error of Commission

b. Ibrahim's A/c & Abraham's A/c 

c. Demonstration in Ledger

Dr                                        Ibrahim's A/c                 Cr
Date	Particulars	Amount	Date	Particulars	Amount
				No Entries

Dr                             Abraham's A/c                            Cr
Date	Particulars	Amount	Date	Particulars	Amount
				No Entries

d. Correction in Journal

Ibrahim's A/c- Credit Side

Abraham's A/c- Debit Side.

4. Payment of Cash to Mr Philip N100 had been entered on the Debit Side of the Cash book and Credit Side of Mr Philip's A/c.

a. Complete Reverse of Entries

b. Mr Philip's A/c & Cash A/c

c. Demonstration in Ledger

Dr                               Philip's A/c                               Cr
Date	Particulars	Amount	Date	Particulars	Amount
				Cash	N100

Dr                                     Cash A/c                          Cr
Date	Particulars	Amount	Date	Particulars	Amount
	Mr Philip	N100

d. Correction in Journal

Mr Philip's A/c- Debit Side (100 x 2= 200)

Cash A/c- Credit Side (100 x 2=200).

5. Cash Payment to Ronaldo N95 had been entered in the book as N59.

a. Error of Original Entries

b. Ronaldo's A/c & Cash A/c

c. Demonstration in Ledger

Dr                                   Ronaldo's A/c                       Cr
Date	Particulars	Amount	Date	Particulars	Amount
	Cash	N59

Dr                                Cash A/c                                Cr
Date	Particulars	Amount	Date	Particulars	Amount
				Ronaldo	N95

d. Correction in Journal

Ronaldo's A/c- Debit Side (95-59=36)

Cash A/c- Credit Side (95-59=36).

Journal	Dr	Cr
1. Motor Van		N900
Sales of Motor Van	N900
Sales was entered in the Sales Account now Corrected.
2. Ogundeji		N600
Sales	N600
Sales from Ogundeji was omitted now Corrected.
3.   Ibrahim		N40
Abraham	N40
Purchases of Goods was entered wrongly now Corrected.
4. Philip	N200
Cash		N200
Payment entered in Both Sides of Different Accounts now Corrected.
5.  Ronaldo	N36
Cash		N36
Cash was paid and was recorded wrongly, now Corrected.

This brings us to the end of Today's Session. Hope this was very helpful to you, leave a comment of what you think of this Tutorial and of your Questions below. Have a Blessed Day and Remember You are Amazing. God Bless You.