Categories: Accounting

What are accounting errors?

Types of accounting errors include  ‘Error of principle’,’ Error of Omission in accounting’, ‘Error of commission’,  ‘Compensating Error’,  ‘Error of original entry’,  ‘Complete reversal of entries’.

Error of principle in accounting: When correct amount is posted to wrong type of account, such error is called error of principle. Suppose machinery installation charges is debited to wages, it  is an example of error of principle.

Error of omission in accounting:  When an entry of transaction is missing from accounting records, it is known as error of omission. Suppose there is a cash transaction for Rs.10000/ – which is neither debited to cash account nor credited to sales account, or cash has been debited to cash account but not credited to sales account then such type of omission is known as error of omission.

Error of commission in accounting:  -Error of commission is the mistake that has taken place in accounting such as a wrong amount is posted or correct amount is posted in the wrong place. Following are the examples of error of commission. (i) Sales of Rs.8200 is posted as Rs.2800/- or (ii) the sales amount is recorded in purchase account or (iii) a ledger account balance is wrongly taken in trial balance.

Error of original entry: An error of original entry occurs when an incorrect amount is posted to the correct account. If amount paid to a supplier 82245/- and same was posted as 82425/-.it is an error of original entry.

Compensating error in accounting: A compensating error occurs when two or more errors cancel each other out. Raw materials purchased by a firm is incorrectly totaled and understated by Rs.10000/- whereas wages paid by the firm is wrongly totaled and overstated by Rs.10000/- which equally matches the first error of total. This is an example of compensating error. Compensatory mistakes cannot be easily identified from trial balance.

Complete reverse entry in accounting: Complete reversal of entries errors arises when the correct amount is posted but to opposite heads of accounts. For credit voucher of Rs.2000/- to be posted to sales account is posted to Cash account and debit voucher of Rs.2000/- for cash account is posted to sales account. These entries can be reversed only by doubling the original amounts i.e. in the above example, debiting cash account by Rs.4000/- and crediting Rs.4000/- to sales account.

Surendra Naik

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Surendra Naik

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