Podcast
Questions and Answers
Which type of error involves a transaction being omitted from the books?
Which type of error involves a transaction being omitted from the books?
- Error of commission
- Compensating error
- Error of principle
- Error of omission (correct)
What type of error results in the wrong entry in the correct class/type, but the wrong account?
What type of error results in the wrong entry in the correct class/type, but the wrong account?
- Error of principle (one entry in the wrong class/type of account)
- Double posting error (wrong amount on both sides)
- Arithmetic errors (incorrect calculation of total or balance)
- Error of commission (one entry in the correct class/type, but the wrong account) (correct)
In which type of error does a correct ledger account balance get entered in the trial balance on the wrong side or as the wrong amount?
In which type of error does a correct ledger account balance get entered in the trial balance on the wrong side or as the wrong amount?
- Error of principle
- Compensating error
- Extraction errors in preparing the trial balance (correct)
- Double posting error (correct amount on the wrong side)
What type of error involves two unrelated arithmetic or posting errors of the same amount?
What type of error involves two unrelated arithmetic or posting errors of the same amount?
What is the purpose of using suspense accounts?
What is the purpose of using suspense accounts?
Where should the entry in the suspense account be placed in relation to the trial balance entry?
Where should the entry in the suspense account be placed in relation to the trial balance entry?
What type of errors are corrected through the use of suspense accounts?
What type of errors are corrected through the use of suspense accounts?
What is the purpose of recording any difference on a trial balance in a suspense account?
What is the purpose of recording any difference on a trial balance in a suspense account?
What is the first step in the procedure for dealing with the correction of errors?
What is the first step in the procedure for dealing with the correction of errors?
In which type of error is correction made via the control account or personal account?
In which type of error is correction made via the control account or personal account?
What is the purpose of using suspense accounts in correcting errors?
What is the purpose of using suspense accounts in correcting errors?
Where should the entry in the suspense account be placed in relation to the trial balance entry?
Where should the entry in the suspense account be placed in relation to the trial balance entry?
Flashcards
Error of Omission
Error of Omission
A transaction completely missed from the accounting records.
Error of Commission
Error of Commission
An entry made to the wrong account, but within the correct class or type of account.
Extraction Error
Extraction Error
Incorrect placement of a ledger account balance on a trial balance (wrong side or wrong amount).
Compensating Error
Compensating Error
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Suspense Account Purpose
Suspense Account Purpose
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Suspense Account Placement
Suspense Account Placement
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Errors Corrected by Suspense Accounts
Errors Corrected by Suspense Accounts
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Purpose of Recording a Difference on a Trial Balance in a Suspense Account
Purpose of Recording a Difference on a Trial Balance in a Suspense Account
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First Step in Correcting Errors
First Step in Correcting Errors
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When to Correct via Control/Personal Account
When to Correct via Control/Personal Account
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Purpose of Suspense Accounts in Error Correction
Purpose of Suspense Accounts in Error Correction
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Opposite Side Entry
Opposite Side Entry
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Study Notes
Types of Errors
- Omission error: a transaction is omitted from the books
- Commission error: a wrong entry in the correct class/type, but the wrong account
- Principle error: a correct ledger account balance gets entered in the trial balance on the wrong side or as the wrong amount
- Compensation error: two unrelated arithmetic or posting errors of the same amount
Suspense Accounts
- Purpose: to temporarily record differences on a trial balance that cannot be immediately identified
- Entry placement: below the trial balance entry
- Corrected errors: errors that cannot be immediately identified
- Purpose of recording differences: to allow for the continuation of the accounting process while the error is being investigated
Error Correction Procedure
- First step: identify the type of error and its source
- Correction via control account or personal account: depends on the type of error
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