Correction of Errors in Trial Balance

The following types of errors do not affect the equality of the Trial Balance, i.e. the Trial Balance will still be in agreement although there may be errors in the accounts.

1. Errors of Omission

A transaction is omitted completely from the books so that there is no debit and credit entry of the transaction, e.g. drawings of $50 cash by the proprietor was not recorded.

When a transaction has been completely omitted from the books, it can be corrected by simply making a double entry to record the transaction.

2. Errors of Commission

An entry is posted to the correct side of the ledger but to the wrong account, e.g. payment of $100 cash by customer A. Joan was wrongly posted to the account of another customer, B. Johan. 

A debit or credit entry has been posted to the wrong account of the same category.  For instance, an entry has been made to Tom's Account rather than Tam's account, both of which belong to the category of debtors.

3. Errors of Principle

An entry made in the wrong class of account.  For example, when an expense is treated as an asset and vice versa, e.g. repairs to buildings $400 was debited to the Building Account.

A debit or credit entry is posted to an account of a different category.  For instance, purchase of furniture for business use has been recorded in the Purchases Account.  

4. Errors of Original Entry

The original figure may be incorrectly entered although the correct double-entry principle has been observed using this incorrect figure, e.g. credit sales of $87 to Ben was recorded in both the Sales Account and Ben's account as $78.

A wrong amount is recorded in a subsidiary book or a document such as an invoice and subsequently posted to the ledger accounts.

5. Compensating Errors

Errors on one side of the ledger are compensated by errors of the same amount on the other side, e.g. the Purchases Account and Sales Account were both overcast by $150.

An error or errors on the debit side is compensated by an error or errors of equal amount on the credit side.

6. Complete Reversal of Entries

An account that should be debited is credited and vice versa, e.g. a cheque $200 received from Charlie was debited to the account of Charlie and credited to the Bank Account.

When recording a transaction, the debit entry is made in the account that should be credited and the credit entry is made in the account that should be debited.