@ 2012, Cengage Learning

Analyzing Transactions

LO 4b – Discovery and Correction of Errors

Trial Balance ErrorsLO 4LO 4

Errors can be made in the accounting system that affect the trial balance.

Errors Causing Unequal Trial Balance

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ErrorsErrors

Trial balance preparation errors

Trial balance preparation errors

Account balance errors

Account balance errors

Posting errorsPosting errors

Column incorrectly addedColumn incorrectly added

Amount incorrectly entered on trial balance

Amount incorrectly entered on trial balance

Balance entered in wrong column or omitted

Balance entered in wrong column or omitted

Balance incorrectly computed

Balance incorrectly computed

Balance entered in wrong column of account

Balance entered in wrong column of account

Wrong amount posted to an account

Wrong amount posted to an account

Debit posted as credit, or vice versa

Debit posted as credit, or vice versa

Debit or credit posting omitted

Debit or credit posting omitted

Tips for Discovering ErrorsLO 4LO 4

Tip 1: Check for a difference of l0, 100, or 1,000 between the two column totals.

This is a good indication that one of the columns has been incorrectly totaled.

Tips for Discovering ErrorsLO 4LO 4

Tip 2: Check if the difference between the totals can be evenly divided by two.

A posting may have been omitted or a debit may have been posted as a credit (or vice versa).

Trial Balance Errors - Transposition A transposition occurs when the

order of the digits is changed by mistake, such as writing $542 as $452 or $524.

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Trial Balance Errors - Slide

In a slide, the entire number is moved one or more spaces to the right or the left by mistake, such as writing $542.00 as $54.20 or $97.50 as $975.00.

Discovery of ErrorsLO 4LO 4

Among the types of errors that will not cause the trial balance totals to be unequal are the following: 1. Failing to record a transaction or to post a

transaction.2. Recording the same erroneous amount for

both the debit and the credit parts of a transaction.

Discovery of ErrorsLO 4LO 4

Among the types of errors that will not cause the trial balance totals to be unequal are the following: 3. Recording the same transaction more than

once.4. Posting a part of a transaction correctly as a

debit or credit but to the wrong account.

Errors Not Affecting the Trial Balance If an error has already been

journalized and posted to the ledger, a correcting journal entry is normally prepared.

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Another type of error is a posting error.

Assume that on May 5 a $12,500 purchase of office equipment on account was incorrectly journalized and posted as a debit to supplies and a credit to accounts payable for $12,500.

Errors Not Affecting the Trial Balance

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Errors Not Affecting the Trial Balance

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The entry to correct the error is: