No one may be the perfect in the world. The same formula applies in accounting also. When there are lot of transactions in a business firm and different accountants are handling the accounting responsibilities, there may be the possibility of errors in recording the transactions. The errors in accounting may be classified as under:-
- Errors of Principles:- When the principles of accounting are not followed at the time of preparing the journal voucher then this type of error occur. In short we can say that if the proper account head are not debited or credited for the business transaction. The trial balance is not affected with this error.
- Errors of Omissions:- When the entry of journal voucher is not done completely in related day book. In some cases what happens is that the journal vouchers are properly written in concerned day book but they are not posted in to ledger. Trial balance is not effected in case of complete omission of entry but if the omission of entry is partial then it can affect the total of the trial balance.
- Error of Commission:- These are most common type of errors. These errors are committed because of lack of proper accounting knowledge or ignorance or carelessness of accountant. For example:- entering the wrong amount in day books, wrong posting, wrong totaling, wrong carry forwarding the the totals or balances from one one page to other page and wrong balancing etc. These errors definitely affect the totals of trial balance.
- Compensating Errors:- These are errors that cancel each other. For example: under-posting the purchase amount in to ledger can be compensated with the under-casting the sales account by a similar amount, omission of posting of an amount in debit side may be compensated by excess posting by similar amount in debit side of other account.
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