Presentation on theme: "WHAT DO I DO IF I MADE A CARELESS MISTAKE IN MY MATHS PROBLEM SUM? WHAT DOES MY TEACHER DO WHEN HE MARKS A QUESTION WRONGLY? WHAT DOES THE CASHIER DO."— Presentation transcript:
WHAT DO I DO IF I MADE A CARELESS MISTAKE IN MY MATHS PROBLEM SUM? WHAT DOES MY TEACHER DO WHEN HE MARKS A QUESTION WRONGLY? WHAT DOES THE CASHIER DO IF SHE GIVES ME THE WRONG CHANGE? WHAT DOES THE UNCLE AT THE GROCERY SHOP DO WHEN HE ADDS UP WRONGLY FOR MY GROCERIES?
1. EXPLAIN & CORRECT ERRORS WHICH DO NOT AFFECT THE AGREEMENT OF THE TRIAL BALANCE TOTALS. 2. EXPLAIN AND CORRECT ERRORS WHICH AFFECT THE AGREEMENT OF THE TRAIL BALANCE TOTALS BY USING A SUSPENSE ACCOUNT. 3. RE-CALCULATE PROFITS AFTER ERRORS HAVE BEEN CORRECTED. 4. REVISE THE BALANCE SHEETS TO RECTIFY THE ERRORS.
Errors ofErrors of omissionomission Errors of commission Errors of principle Errors of original entry Compensating errors Complete reversal of entriesreversal of entries ErrorsErrors of omission of oneomission of one entry Errors in calculations Errors in amount Posting to the wrong side of anthe wrong side of an account
When a transaction has been completely omitted from the books. By making a double-entry to record the transaction. Main
An entry has been posted to the wrong account of the same category. To reverse the entry in the wrong account and to post the correct entry. Main
An entry has been posted to the wrong account of a different category. To reverse the entry in the wrong account and to post the correct entry. Main
A wrong amount is recorded in a book of original entry or a document such as an invoice and subsequently posted to the ledger accounts. To correct the difference in the correct and wrong amount accordingly. Main
An error on the debit side is compensated by an error of equal amount on the credit side. To reverse the error on both debit and credit sides of the accounts concerned. Main
When recording a transaction, the debit and credit entries are reversed. By making the necessary posting of an amount double the amount of the original error. Main
Forgetting to either debit or credit one side of a transaction. By making the necessary posting which has been omitted against an entry in the Suspense Account. Main
Mistakes made in calculation. To account for either the overcast or undercast of figures. Main
The amount debited and the amount credited are different. To account for either the overcast or undercast of figures accordingly. Main
Causing one side of the ledger to be more than the other by twice the value of the error. To make the necessary adjustments against Suspense Account. Main
A cash payment of $2,000 for purchases has been omitted from the books. Purchases Account $ Cash Account $ Cash 2,000 Purchases 2,000 Main Journal entry
A sale of $1,000 to Carrefour has been posted to Cold Storage - Causeway Point. Cold Storage - Causeway Point $ $ Sales 1,000 Carrefour $ ERROR MADE CORRECTION MADE Carrefour 1,000 Cold Storage - 1,000 Causeway Point Main Journal entry
Repairs to vehicles amounting to $3,000 has been posted to Vehicles Account. Vehicles Account $ $ Cash 3,000 Repairs Account $ ERROR MADE CORRECTION MADE Repairs 3,000 Vehicles 3,000 Main Journal entry
A purchase of $2,100 from Pokka Corporation Limited by Carrefour has been entered in the Purchases Journal and posted to the ledger as $2,010. Purchases Account $ Pokka Corporation Limited 2,010 Pokka Corporation Limited $ Purchases 2,010 ERROR MADE CORRECTION MADE Pokka Corporation Limited 90 Purchases 90 Main Journal entry
$ $ $ $ ERROR MADE CORRECTION MADE Wages 10 Rent received 10 Main Rent received $340 is correctly debited to the Cash Account but posted as $350 to Rent Revenue Account. Similarly, wages paid, a sum of $590, is correctly credited to the Cash Account but posted as $600 to Wages Account. Rent Revenue Account Wages Account Cash350 Cash 600 Journal entry
$ $ $ $ ERROR MADE CORRECTION MADE Carrefour 700 Cash 700 Main A payment of $700 to a creditor, Carrefour, should be debited to Carrefour’s account and credited to the Cash Account, but the entries are reversed. Cash Account Carrefour Carrefour 1,400 Cash 1,400 Journal entry
A cash payment of $2,000 for purchases has been omitted from the Purchases Account. Purchases $ $ Cash 2,000 Suspense Account $ $ Purchases 2,000 CORRECTION MADE Main Journal entry
A purchase of $2,100 from Pokka Corporation Limited by Carrefour has been entered in the Purchases Journal as $2,010. The amount shown on the other account is correct. Purchases $ $ Suspense 90 Suspense Account $ $ Purchases 90 CORRECTION MADE Main Journal entry
Rates paid $210 was entered correctly in the Cash Book but wrongly entered as $120 in the Rates Account. Rates Account $ $ Suspense 90 Suspense Account $ $ Rates Account 90 CORRECTION MADE Main Journal entry
Discount received $100 posted to the debit side of the Discount Received Account. Suspense Account $ $ Discount Received200 Discount Received Account $ $ Suspense Account 200 CORRECTION MADE Main Journal entry
P.S. The suspense account would be self-balancing when all the errors made are detected and corrected, otherwise, it would either have a credit or debit balance when closed!
Correcting Net Profit Figure Errors made in the accounts would affect the figures in our final accounts. óErrors that affect the Gross Profit and Net Profit figures are items that are transferred to the Trading and Profit and Loss Accounts ultimately. E.g. Sales, Rent, Commission Received etc. óErrors of items found in the Balance Sheet will not affect the profit figure, instead, they will overstate or understate the assets and liabilities figures. E.g. Furniture, motor vehicles, loan, bank overdraft etc.
Statement of Corrected Net Profit $ Net Profit before COE 1,700 Add Expenses overcast XX Revenue undercast XX XX Less Expense undercast XX Revenue overcast XX XX Adjusted Net Profit XX Note: Overcast means showing more than there actually is Undercast means showing less than there actually is