Accounting errors and their correction
Accounting Errors and Correction
In one sentenceErrors in recording or posting transactions, such as omission, a wrong figure or a wrong account; they are corrected with a correcting entry, not by deleting the original entry.
Simply put
Some errors are revealed by the trial balance because it does not balance, but many are not revealed by it: an entry recorded with the wrong figure on both sides, posted to a wrong account of the same type, or not recorded at all.
Correction is made with a new entry that reverses the effect of the error, so the trail of what happened stays clear to anyone reviewing. A practical tip: if the difference is divisible by 9, look for two transposed digits.
Worked example
A restaurant's accountant recorded the month's rent as 21,000 SAR instead of 12,000 SAR on both sides (rent expense and bank), so the trial balance stayed balanced.
Difference: 21,000 − 12,0009,000 SAR
The difference is divisible by 9: 9,000 ÷ 91,000
Correcting entry: Dr Bank (debit)9,000
Cr: Rent expense (credit)9,000
Rent expense after correction: 21,000 − 9,00012,000 SAR
Don't confuse it with
Prior period errorsAn error in the statements of a closed year is corrected by restating the opening balances and comparative figures, not with an entry in the current year.