Bookkeeping and accounts question?

Question

write notes on the following errors that occur in trial balances;

a errors in original entry

b errors of principle

c compensating error

Explain how to check entries in the trial balance when the two sides do not agree

Answer 1

a - composition error (mixing the correct numbers up) or incorrectly typing

b - incorrect accounting (?) not sure on this one

c - error to correct another error in the TB

When the TB does not balance, check Trial balance accounts to supporting nominal ledger accounts. If double entry has been entered corrrectly it should balance.

Answer 2

a errors in original entry

These can be any error. If it shd be $80 and you posted $800 for both dr and cr, you'll never find your error just looking at the TB, since it will balance.

b errors of principle

If the accounting principle is to depreciate a truck over 5 yrs and you went and depreciated it over 6 yrs, the TB won't tell you either.

c compensating error

If amount was $60 and you posted $66 and another amt was $86 and you posted as $80, the TB won't tell too too.

To find an error, follow these steps:

1.   Re-add the columns, it may be a simple math error. If the balances are now equal, stop.  If they are still unequal continue with the steps below until the columns become equal.

2.  Determine the amount you are off by.  

        ~ If you are off by 10, 100, 1,000 it is probably a math error.  Go back and see if you put in all of the correct numbers.

        ~ If the amount off is divisible by 9, you likely have a transposition (you entered 76 instead of 67) or slide (you entered 15 instead of 150) error.  Go back and double check the amounts from the ledger.

3.  Did you omit an account? Or did you put the account balance in the wrong column?  Divide the difference by 2 and look for an account with that balance to see if it was entered in the wrong column.

4.  Is there a math error in the ledger?  Double check ledger work for a possible error.

5.  Is there a posting error?  Did you post an amount to the wrong account? Go back and check the journal against the ledger to see if they are in agreement.