An accounting error is named by what went wrong in the record, not by whether the trial balance agrees. Ask two questions for every slip: what was recorded, and what should have been recorded?
This lesson belongs to SPM Accounting correction of errors. If debits and credits still feel uncertain, practise them with the debit-credit transaction trainer first.
How do I name an error type?
Compare the wrong entry with the right entry, then match the gap to one of six patterns. The gap decides the type, so write both entries down before choosing a label.
| Error type | What went wrong | Trial balance |
|---|---|---|
| Omission | Transaction left out completely | Agrees |
| Commission | Right amount, wrong account of the same class | Agrees |
| Principle | Wrong account from a different class | Agrees |
| Original entry | Wrong amount on both sides | Agrees |
| Compensating | Two separate errors of equal size cancel out | Agrees |
| Reversal | Debit and credit swapped | Agrees |
Worked example: six slips at Kedai Runcit Maju
Kedai Runcit Maju is an invented shop. Its bookkeeper made these slips during the month.
- A credit sale of RM300 to Ali was never recorded. Omission, because neither side was posted.
- Electricity of RM120 was debited to Rent. Commission, because both are expense accounts.
- The owner took goods worth RM200 for home use, and the bookkeeper debited Purchases. Principle, because drawings belong to capital, not expenses.
- A sale of RM540 was recorded as RM450 in both Sales and the debtor’s account. Original entry, because both sides carry the same wrong amount.
- Sales was overcast by RM100 and Rent Received was undercast by RM100. Compensating, because two separate errors offset each other.
- A payment of RM80 to a creditor was debited to Cash and credited to the creditor. Reversal, because the sides are swapped.
The mistake that mislabels errors
Some students classify by effect. They see that the trial balance still agrees and write “compensating”, because that is the type they remember as hiding errors.
Compensating errors need two separate mistakes. In slip 2 there is only one mistake, a wrong account, so the label is commission. Ask every time whether a second error exists before writing “compensating”.
Errors that do disturb the trial balance
Some slips break the agreement. If a cash receipt of RM75 is posted to Cash but the debtor’s account is left untouched, only one side is recorded. The trial balance shows a difference of RM75, which goes into a suspense account until the error is found.
These errors are found by investigating the difference. The errors in the table above are found by checking source documents, which is why the next lesson covers writing correcting journal entries.
Check yourself
A shop buys an office chair for RM600. The bookkeeper debits Purchases RM600 and credits Cash RM600. Name the error type and say whether the trial balance agrees.
Answer
The chair is a non-current asset, so it should be debited to Office Furniture. The bookkeeper used Purchases, which is a trading account from a different class.
That makes it an error of principle. The trial balance agrees, because debit and credit are both RM600.
What to study next
Next, turn each label into a correcting entry in writing correcting journal entries. Then see how each error moves profit in calculating the effect on profit.
For help from a teacher who checks your reasoning on your own questions, see online one-to-one Accounting tuition.