Adjustments

Matching exercise

Match the items on the right to the items on the left.

Types of Errors in Accounting

Read this guide before the exercises.
  • Errors of omission are defined as those errors that result from a partial or complete omission of a transaction from the account books.
  • Errors of commission are defined as those errors that occur due to incorrect recording of transactions in the account books.
  • Error of principle is an accounting mistake in which an entry violates a fundamental principle of accounting or a fundamental accounting principle established by a company. These errors resemble errors of commission except in one respect: errors of commission usually lead to oversight whereas errors of principle are caused by a lack of knowledge of accounting principles.
  • Compensating error is when one error has been compensated by an offsetting entry that's also in error. For example, the wrong amount is recorded in inventory and is balanced out by the same wrong amount being recorded in accounts payable to pay for that inventory.
  • Error of original entry is when the wrong amount is posted to an account. The error posted for the wrong amount would also be reflected in any of the other accounts related to the transaction. In other words, all of the accounts involved would be in balance but for the wrong amounts.
  • Error of entry reversall is when the accounting entry is posted in the wrong direction, meaning a debit was recorded as a credit or vice versa. For example, cost of goods sold, which contains raw materials and inventory, is credited instead of debited and finished inventory is debited instead of credited.
  • Journal is a detailed account of all the financial transactions of a business.
  • An undercast is the opposite of an overcast, in which a forecaster has underestimated a certain performance metric, either due to incorrect inputs or unforeseen events.
♦ Tony Hanks has added up the figures to produce a figure which is less than it
should be.
♦ The sales account and the purchases account were both added up wrongly by the
same amount.
♦ Maria Stewart forgot to record the transaction in the accounts.
♦ Frank Mann recorded the purchase of the lorry in the purchases account but it
was a fixed asset.
♦ Sue Black has corrected the error and recorded it in this book.
♦ Anna Franks made a mistake in the invoice but entered the same figure in both
the sales and the customer's account.
♦ Lesley Brunovsky entered the correct amount in the correct accounts but as a
debit where it should have been a credit, and a credit where it should have been
a debit.
♦ Garry Blues has added up the figures wrongly to produce a total which is greater
than it should be.
♦ Theo Koch entered the correct amount but in the wrong customer's account.