Accounting Errors

Chapter list > Accounting Errors

Write the meaning of Errors of Principle

The error where a transaction has been recorded in total disregarded of the fundamental principles of double entry system, such error is known as errors of principle. If errors occur because of recording transactions against the principles of accounting, those errors are of principles and such errors will not lay any effect on that balance. Recording of the purchase of furniture n purchases account, sale of building in sales account are the examples of errors of principles.

With a suitable example write the meaning of 'Errors of Omission'.

Errors of omission:           The errors which occur because of the transactions that have not been recorded in books of original entry are errors of omission. For example, if a transaction for salary is omitted to record in original books,  that will not even enter in cash and salary accounts. As both sides are affected by equal amount, so the trial balance shall agree.

Write the meaning of Errors of Compensating Error:-

The error where an error is one side of any account is automatically balance or neutralized with the help of any error in another side of any account with same amount, such error is known as compensating error. Compensating errors neutralize the effect of errors committed earlier. In words, if errors already occurred are covered by errors occurred the next times, they are compensating errors. For example, forgetting to post Rs.200 on the debit side of a certain account may be compensated by under posting Rs.200 on the credit side of other account.

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