General Journal
Correction of Errors
Errors are corrected by first making double entry in the journal. The entries are then posted to
the relevant accounts in the ledgers. Take the following steps when seeking to correct an error.
1. Determine what was done in the ledgers
2. Determine what should have been done in the ledgers
3. Determine what must be done in the ledger to correct the error
Errors are easily corrected if you know the following:
1. Your rules of entry and how to prepare general journal entries
2. Whether an account which is incorrect carries a debit or credit balance
3. Classes of accounts – real, nominal and personal.
Categories of Errors
There are two categories of errors:
1. Errors which do not affect the trial balance
2. Errors affecting the trial balance
Errors Which Do Not Affect The Trial Balance
- Error of omission
- Error of original entry
- Error commission
- Error of principle
- Complete reversal of entries
- Compensating errors
The trial balance is merely a superficial evidence of the arithmetic accuracy of postings of
transactions as there are certain types of mistakes which do not affect the balancing of the trial
balance.
1. Errors of Omission
These errors are made when a transaction was completed left out of the books. No entry was
made in the ledgers.
Example: Invoice received from J. Parker $320 had been misplaced and no entry was made in
the books.
General Journal
Date Details Folio Debit Credit
Jan 18 Purchases GL 320
J. Parker PL 320
(credited purchases omitted from the
books now recorded)
2. Errors of Original Entry
This type of error is made when an incorrect amount is copied from the source document,
entered in the books of original entry (journals), and then posted to the ledger. The correct
double entry was made.
Example 1: Invoice received from J. Parker for $320 was entered in the accounts as $220
The Error that was made:
DR Purchases $220
CR J Parker $220
In the ledger, this error would appear as:
Purchases A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 J Parker PL 220
J. Parker A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 Purchases GL 200
The correction needed is: DR Purchases $100; CR J Parker $100
The general journal would appear as:
General Journal
Date Details Folio Debit Credit
Jan 18 Purchases GL 100
J. Parker PL 100
(Credit purchases of $320 entered as
$220 now corrected)
In the ledgers this correction would now appear as:
Purchases A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 J Parker PL 220
J. Parker PL 100
J. Parker A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 Purchases GL 200
Purchases GL 100
Example 2: Invoice received from J. Parker for $320 was entered in the accounts as $500
Error made:
Dr Purchases $500
CR Parker $500
In the ledger, this error would appear as:
Purchases A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 J Parker PL 500
J. Parker A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 Purchases GL 500
The correction needed is: DR J Parker $180; CR Purchases $180
The general journal would appear as:
General Journal
Date Details Folio Debit Credit
Jan 18 J. Parker PL 180
Purchases GL 180
(Credit purchases of $500 entered as
$180 now corrected)
In the ledgers this correction would now appear as:
Purchases A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 J Parker PL 500 J Parker PL 180
J. Parker A/C
Date Details Folio Amount Date Details Folio Amount
Purchases GL 180 Jan 18 Purchases GL 500
3. Error of Commission
The correct amount is entered on the correct side, but in the wrong account of the same class.
(Amount entered in wrong person’s account; or entered in wrong account, but same class of
account.
Note: Class of Accounts
- Real Accounts: Accounts of property, e.g. Furniture, vans, buildings, cash, bank, etc.
- Nominal accounts: accounts of expenses, revenues and capital, e.g. Rent, commission
received, etc.
- Personal Accounts: Accounts of debtors and creditors
Example: Goods sold on credit to M. Josephs for $400 was entered in M. J. Josephs account.
Error made:
Dr M J Josephs 400 (instead of debiting M. Joseph)
Correction needed: reverse the debit entry from MJ Josephs account by crediting it and debit
the account that was originally to be debited – M Josephs
DR. M. Josephs $400
CR. MJ Joseph $400
General Journal
Date Details Folio Debit Credit
M Josephs SL 400
MJ Josephs SL 400
(Sales of goods to M Josephs entered in
MJ Josephs’ A/C now corrected)
4. Errors of Principle
These errors are made when the correct amount is entered on the correct side, but in the
wrong account and wrong class of account.
Examples:
1. Payment of $450 for motor expenses was entered in motor vehicle account.
2. Purchase of motor van $10 000 was entered in purchases account
3. Sale of equipment $2000 was entered in sales account.
1/ Error made:
Dr Motor vehicle $450 (instead of debiting Motor expenses)
Correction needed: reverse the debit entry from motor vehicle by crediting it and debit the
account that was originally to be debited – Motor expenses.
DR. Motor expenses $450
CR. Motor vehicle $450
General Journal
Date Details Folio Debit Credit
Jan 18 Motor expense GL 450
Motor vehicle GL 450
(Payment of motor expenses entered in
motor vehicle a/c now corrected)
2/ Error made:
Dr purchases $10000 (instead of debiting Motor van)
Correction needed: reverse the debit entry from purchases account by crediting it and debit the
account that was originally to be debited – Motor van
DR. Motor van $10 000
CR. Purchases $10 000
General Journal
Date Details Folio Debit Credit
Jan 18 Motor van GL 10000
Purchases GL 10000
(purchases of fixed asset entered in
purchases a/c now corrected)
3/ Error made
CR. Sales $2000 (instead of crediting equipment)
Correction needed: reverse the credit entry from Sales account by debiting it and credit the
account that was originally to be credited – Equipment account
DR. Sales $2000
CR. Equipment $2000
General Journal
Date Details Folio Debit Credit
Jan 18 Sales GL 2000
Equipment GL 2000
(Sale of fixed asset entered in sales a/c,
now corrected)
5. Complete Reversal of Entry
This is where the correct amounts are entered, but on the wrong side of the account, that is,
the account to be debited is credited and the account to be credited is debited.
Example: Cash of $450 paid into bank was credited to bank account and debited to cash
account.
Error made:
CR Bank $450 ; DR Cash $450
Correction needed:
DR. Bank $900 ; CR. Cash $900
Looking at how the error was made in the ledger may help you to understand the correction
better.
Bank A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 cash CB 900 Jan 18 Cash CB 450
Cash A/C
Date Details Folio Amount Date Details Folio Amount
Jan 18 Bank CB 450 Jan 18 Bank CB 900
General Journal
Date Details Folio Debit Credit
Jan 18 Bank CB 900
Cash CB 900
(Cash paid into bank entered on the
wrong side of the accounts, now
corrected)
6. Compensating Errors:
These are errors that cancel out each other. In this case, an error is made on the debit side of
one account and a similar error for the same amount is made on the credit side of another
account.
Example: Sales of $4500 was entered as $4000 and purchases of $9000 were entered as $8500.
General Journal
Date Details Folio Debit Credit
Jan 18 Purchases GL 500
Sales GL 500
(sales and purchases understated now
corrected)
Practice questions:
Name the kind of error that has occurred in EACH of the following situations below
(i) A sales invoice was misplaced and was not recorded in the books at all
Ans. Error or omission
(ii) A purchase of goods for cash $3000 was recorded as $300 on the purchases invoice
Ans. Error of original entry
Correction: DR. Purchases $2700 ; CR. Cash $2700
(iii) The sale of an old motor van for $2000 was recorded in the sales account
Ans. Error of principle
Correction: DR. Sales $2000; CR. Motor van $2000
(iv) A sale of $2500 was recorded as $2000 and a purchase of $3000 was recorded as
$2500.
Ans. Compensating error
Correction: DR. Purchases $500; CR. Sales $500
Errors Affecting the Trial Balance
Suspense Account
Where the totals of a trial balance do not agree, the difference should be placed in a suspense
account.
If the debit side of the trial balance is short, the difference is placed on the debit side of the
suspense account and if the credit side is short, the difference must be credited to the suspense
account.
Having placed the difference in a suspense account, the errors must then be located and
corrected, in order to illuminate the balance on the suspense account.
Note: Only errors which affect the agreement of the trial balance must be corrected with the
aid of the suspense account. These errors are all one-sided errors because only one account
will be incorrect. These include errors such as;
1. Single Entry: Where only half of a transaction has been recorded, for example, if a debit
entry was made, but not the credit entry, or vice versa.
2. Where the correct amount is entered for one account, but an incorrect amount for the
other account.
3. Where two debit entries are made, or two credit entries, instead of a debit and credit
entry.
4. Incorrect calculations in any one account.
Note Carefully:
Understate/Under-cast: The amount entered in the account is too small
Overstate/overcast: The amount entered in the account is too large
To Correct:
1. Accounts that are understated/under-cast
- If the account has a debit balance: debit the account to correct it
- If the account has a credit balance: credit the account to correct it
2. Accounts that are overstated/overcast
- If the account has a debit balance: credit the account to correct it
- If the account has a credit balance: debit the account to correct it.
Try these:
Transaction Errors Account to be Account to be
debited credited
1. Sales overcast
2. Purchases under-cast
3. Wages under-cast
4. Rent overcast
5. Capital account was overcast
6. Motor van account was under-cast
7. Debtor’s account – J. James was overcast
8. Creditor’s account – C Smith was under-cast
Practice Questions
Question 1
On preparing a Trial Balance as at April 30, 2010 there was a difference; the debit side totaled
$91 000 while the credit totaled $95 880. An investigation was carried out and the following
errors were found:
(a) A credit sale of goods amounting to $21,000 to Franklin Johnson was debited to the
account of Mary Johnston.
(b) A payment of $6200 made to JPS for electricity had been debited to the electricity
expenses account as $6020.
(c) The sales journal had been overstated by $6000.
(d) The purchases journal had been overstated by $2500.
(e) Return Outwards Journal was overstated by $1,400.
(f) Motor van sold for $50,000 had been credited to the Sales Account.
Required:
(a) Prepare journal entries required to correct the above errors.
(b) Create a Suspense Account.
Question 2
The trial balance of J Jump, prepared on December 31, did not balance. The following errors
were discovered:
(i) Sales of $360 to K. Dunbar had been posted, in error, to the account of K. Adams
(ii) $400 drawn by J. Jump for his personal use had been charged to office expenses
(iii) A cash discount of $10 was allowed to B. Gooden and credited to him, but no entry
was made to the discount account
(iv) The addition of the sales daybook was under-cast by $300.
(v) A Machine bought for $1000 cash was entered in the purchases account
(vi) A bank overdraft of $626 had been entered as $662 in the bank account
(a) Prepare the journal to correct the errors
(b) Prepare the suspense account showing the original difference in the trial balance
(c) Assuming that the incorrect net profit calculated by J Jump on December 31 was $9200,
calculate the correct net profit
Question 3
On taking out a Trial Balance on March 31, 2011 there was a difference which was taken to
Suspense Account. The following errors were subsequently discovered:
(a) A credit sale of goods amounting to $15,000 to Johnny Thomas was debited to the
account of John Tomas
(b) The Sales Day Book was overcast by $1,500.
(c) A sale of goods for $12,000 made to A. Lincoln was entered correctly in the Sales Day
Book but was entered in his account as $1,200.
(d) A purchase of goods on credit for $8,000 from T. Towers has been debited to his
account.
(e) Motor van sold for $200,000 had been credited to the Sales Account.
(f) The Purchases Day Book was under cast by $900.
(g) A purchase of goods from B. Johnson was correctly entered to the Purchases Day Book
as $25,000 was credited to his account for $52,000.
(h) Accrued rent from the previous period for $10,000 was not brought forward in rent
account for the current period.
(i) Return Inwards Journal was overcast by $2,500.
(j) Discount received from a creditor for $12,000 was entered as $21,000 to Discount
Received Account.
Required:
(a) The Journal entries required to correct the above errors. (10 marks)
(b) The Suspense Account. (7 marks)
(c) List three errors that will not be disclosed by a Trial Balance. (3 marks)
Question 4
The trial balance of Rumetrac did not balance as at May 31, 2010. The debit side totaled
$73 500 while the credit totaled $73 700. An investigation was carried out and the
following errors were found:
1. Motor vehicle expenses amounting to $650 had been charged to motor
van account.
2. A payment of $12 050 made to NWC for water rate had been debited
to the water expenses account as $12 500.
3. The sales journal had been overstated by $5 000
4. The purchases journal had been overstated by $6 000
5. A payment of $350 made for stationery had been posted to the credit
side of stationery account.
6. A payment of $950 had been made for telephone rates but was posted
to the cash book only.
REQUIRED
a) Give the journal entries to correct the errors ( 10 marks)
b) Write up the suspense account to clear the difference ( 5 marks)
c) State which of the above errors would affect the trial balance
agreement and which would not. (5 marks)
