0Rectification of errors that affect Trial balance is a challenging job for an accountant. Until the error is located and fixed, suspense account is temporarily created to tie the totals of trial balance agree.
Errors in accounting may arise by any one of the causes listed below.
1.Error of Commission
This is error committed while totalling subsidiary books such as purchase,sales,purchase returns, sales returns, incorrect totalling in ledger balancing, etc.
2.Error of omission
Error committed in completely/partially omitting to record or post any financial transaction. Ex, missing to post sales to Mr. X in Mr.X ledger account.
3.Error of Principle
Error committed in recording a journal entry not in line with the golden rules of accounting. Ex, salary paid to Mr. A, employee is debitted to Mr. A ledger account.
4.Compensating Error
Error committed in recording or posting a debit aspect which is offset with error committed in recording or posting a credit aspect, thereby the trail balance is agreed in total. Ex, sales book and purchase book overcast by Rs.10000
Trust this lesson would give basic understanding of types of errors in accounting process.
