Trial Balance and Rectification of Errors Test - 4

When a transaction has been misrecorded either wholly or partially, it is known as error of commission.

Time of depiction of an error means the time when the error committed is detected. It may happen before or after the preparation of trial balance or even after the preparation of final accounts.

Accounting entries are recorded as per the generally accepted accounting principles (GAAP). If any of these accounting principles are violated or ignored, errors resulting from such violation are known as errors of principle.

Suspense account is opened to tally the trial balance, when accounting errors cause disagreement of trial balance.

it will be an error of principle only if Karan is not an employee.

It is an error of omission.

Debit balance of every account is shown at the assets side while the credit balance is shown at liabilities side.

When accounting errors cause the trial balance to disagree, suspense account is opened to tally the trial balance.

It is a one sided error and therefore will affect the trial balance.

When a transaction is completely omitted from recording in the books of original record, it is an error of complete omission. When the recording of transaction is partly omitted from the books, it is an error of partial omission.

Error of principle arises due to violation of accounting principles. Error of commission arises when transactons are wrongly recorded or posted.

Balance of suspense account is due to unidentified errors. It is transferred to the balance sheet so that the final accounts can be closed in time and rectification can be done later when the errors are identified.

Accounting errors cause disagreement of the trial balance.

Trial balance is not affected by two sided errors because in these errors, every error is neutralized by an equal and opposite error.

Two sided errors do not cause the trial balance to disagree, only one sided errors do.

Compensating errors are two sided errors, where an error in computation or in recording of accounting data is neutralized by an equal and opposite error.

When accounting errors cause disagreement of trial balance, suspense account is opened to tally the trial balance.

Under casting of sales book implies under recording of sales which will be rectified by crediting the sales account.

Errors of principle arise due to violation of accounting principles. For example, if a capital receipt is recorded as a revenue receipt or vice versa, it may lead to under/over stating of income or assets or liabilities etc and will therfore have an impact on the financial statements.

This is a one sided error, which are rectified by opening suspense account.