Lesson 59
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Transcript of Lesson 59
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Lesson 59
Correction of Errors
Accounting
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By the end of this Lesson
You will
1. Mark the homework ..Sheet 33 Q’s 2 & 3
2. Learn how to correct errors (6 types) that do not prevent the trial balance from agreeing
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First ..mark your work and hand in
Homework answers given over the next 4
slides
Give a tick for each correct entry…add ticks to give total for each question
Careful marking leads to perfect answers and outstanding exam results ….go for it!
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Correction of Errors…Top TipEven if you are asked to do the correcting double entry in the
General Journal ..always work your answer out in ledger form first!
3 Stage Method1 Show the entries that have been done2 Identify the mistake3 Correct the mistake with a double entry
Together we will work through theH Sagrott question
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Business of K Sagrott…(a)Bank
D McDuff 28
D McNabBank 28 D McDuff
28D McDuff
D McNab 28
General Journal D McDuff Dr 28
D McNab 28Being correction of error of commission
Working …you can abbreviate
Answer
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Business of K Sagrott…(b)Bank
Office furniture 65
Office ExpensesBank 65
Off furniture 65
Office furnitureOffice Expenses 65
General JournalOffice furniture Dr 65Office expenses 65
Being correction of error of principle
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Business of H Sagrott…(c)Discount Received
Sundries 10
Discount Allowed
Discount All 10
Disc Rec 10
General Journal
Discount allow Dr 10Discount received 10Being correction of error of commission
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Stop off at your Reference PointYou will need to know the 6 types of error not affecting the trial
balance
1. Error of commission
Failure to do one’s job properly because accounts with similar names were mixed up
2. Error of principle
Lack of understanding of how to do accounts properly
3. Original error Mistake made in a book of original entry
4. Reversal Entire double entry the wrong way round
5. Compensating Two unrelated mistakes that by chance cancel each other
6. Omission Complete double entry totally missed out
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Question 3 A Smythe
Save time by abbreviating on working accounts
General Journal M Ltd
PurchM Ltd 1 600
Purch 1 600
M Ltd 1 600
Pch 1 600Jn 30 Machinery Ltd 1600 Purchases 1600Being correction of error of principle
BankD Gor ?
D Gor ?Bank ?
Dis RecD Gor 7-50
DR 7-50 D Rec 7-50
D Gor7-50
Jn 30 Disc Rec 7-50 D Gorrie 7-50
Being correction of discount disallowed
Dep on M
Ma 80
FittingsDep 80M 80
MachineryFit 80
Jn 30 Fittings 80
Machinery 80
Being correction of error of commission
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Now ..do Q4 in your bookEven if you are asked to do the correcting double entry in the
General Journal ..always work your answer out in ledger form first!
3 Stage Method1 Show the entries that have been done2 Identify the mistake3 Correct the mistake with a double entry
You should be able to do Q4 inside 10 minutes ..without cutting corners!
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Big Picture on Correction of Errors
Remember the 2 partsErrors that do prevent the trial balance totals from agreeing
Errors that have NO EFFECT on the agreement of the trial balance
So We will now move on to
Done this one
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If the Trial Balance does not agree
Make the trial balance agree by creating a suspense account
Trial Balance of D Beckham at 30 April 2001
Dr Cr
Capital 20Sales 30Purchases 80Rent 6Premises 14
100
Suspense 50
Suspense Account
Bal b/d 50
In the first few days of May the error was found (Purchases Day Book was overcast by
£50)
So if PDB was too big by £50 this bigger figure would have been posted to Purchases Account
Crediting Purchases Account with £50 will correct purchases and debiting suspense with £50 will clear the suspense
Purchases 50
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Sheet 34 Question 1 ..A Baynes
Suspense account
Balance b/d 39
M Lacey account
Suspense 39
M Lacey 39General Journal
M Lacey Dr 39
Suspense 39Being correction of failure to post to creditors account
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Homework
For next Lesson
From worksheet 33 do questions 5 and 6
From worksheet 34 do questions 2 and 3
please, always stick the question into your book
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Summary
E X P L A I N T O Y O U R P A R T N E R1. Name and explain the 6 types of error that
do not prevent the TB from agreeing2. What is the purpose of a suspense account3. Why are accountants only happy when the
suspense account has been cleared?
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