Bibliografía del curso

The following errors were later discovered in the books of Olorunleke Brothers even though its trial balance balanced:

i. Purchases of N21,000 on credit from Jimmy King had been entered in Jimmy Chung A/c.

ii. A cheque of N13,200 paid for rent was entered on the cash column of the cash book instead of the bank column.

iii. Sales on account of N16,500 to Uyi Technical had been entered in error in Uyi Engineering’s A/c

iv. Equipment purchased at N96,970 cash entered in the correct accounts in error as N96,790.

v. A cheque of N256,800 paid to Angelica Plc was debited to the bank A/c and credited to Angelica Plc A/c.

vi. A sale of motor vehicle for N57,700 had been entered in the sales A/c.

vii. Cash withdrawn from bank N50,000 had been entered on the credit side of the cash column and debit side of the bank column.

viii. Purchase of goods for resale N92,000 was entered in error in machinery A/c.

ix. Cash of N500,000 invested into the business by the owner was completed omitted from the books.

38 Required:

a. Identify the types of error above.

b. Journalise the entries to correct the above errors.

SOLUTION

(a) i. Error of commission

ii. Error of commission iii. Error of commission

iv. Error of original entry and transposition error. Note that this error is considered as error of original entry because the question stated that the transposed figure was entered in the two accounts involved. Had this not been the case, the error would only be transposition error.

v. Error of complete reversal of entries vi. Error of principle

vii. Error of complete reversal of entries viii. Error of principle

ix. Error of omission

39 (b) Date or

Item no

Detail Debit

N

Credit N i Jimmy Chung A/c

Jimmy King A/c

To correct purchases on account from Jimmy King wrongly credited to Jimmy Chung

21,000

21,000 ii Cash A/c

Bank A/c

To correct cheque payment for rent entered as cash payment

13,200

13,200 iii Uyi Technical A/c

Uyi Engineering A/c

Being the correction of credit sales to Uyi Technical entered in error to Uyi Engineering

16,500

16,500

iv Equipment A/c Cash A/c

To correct error in respect of equipment purchased at N96,970 but entered in both accounts as N96,790

180

180

v Angelica Plc A/c Bank A/c

Being the correction of complete reversal error relating to liability payment

513,600

513,600 vi Sales A/c

Motor vehicle disposal A/c

To correct the disposal of non-current asset entered in error as sales

57,700

57,700 vii Cash A/c

Bank A/c

Being correction of error of complete reversal relating to cash withdrawn from bank

100,000

100,000

viii Purchases A/c Machinery A/c

To* correct error involving purchases entered in machinery A/c

92,000

92,000 ix Cash A/c

Capita A/c l

Being* the correction of owner invested cash completely omitted from the books

500,000

500,000

* You will note that we started the narration with ‘being’ or ‘to’. It does not necessarily matter which one you use. Moreover, you might even wish to ignore both without any fundamental breach of rule provided the narration captures the event to which it relates.

40 4.0 CONCLUSION

This Unit examined special errors which do not affect the trial balance and so complements the treatment of errors that affect the trial balance as discussed in Unit 2. There is need for these errors to be corrected otherwise the financial statements will be incomplete and misleading.

5.0 SUMMARY

There are two broad groups of errors namely, errors that affect the trial balance and errors that do not affect the trial balance. Errors that do not affect the trial balance when committed do not distort the equality of the totals on the debit and credit sides of the trial balance and so are usually very difficult to discover. Upon discovery, these errors must be corrected accordingly.

6.0 TUTOR-MARKED ASSIGNMENT

1. List and explain six errors that do not affect the trial balance. In addition, state the accounting entries for correcting these errors.

2. The following errors were later discovered in the books of Olorunleke Brothers even though its trial balance balanced:

i. Sales of N50,000 on credit to Jimmy King had been entered in Jimmy Chung A/c.

ii. A cash of N13,200 paid for rent was entered on the bank column of the cash book instead of the cash column.

iii. Purchases on account of N16,500 from Uyi Technical had been entered in error in Uyi Engineering A/c

iv. Equipment sold at N96,970 cash entered in the correct accounts in error as N96,790.

v. A cheque of N256,800 received from Angelica Plc was credited to the bank A/c and debited to Angelica Plc A/c.

41

vi. A motor vehicle originally held for resale was sold for N57,700 and had been entered in the sales A/c. Any error here?

vii. Cash deposit into the bank N50,000 had been entered on the debit side of the cash column and credit side of the bank column.

viii. Purchase of machinery for resale N92,000 was entered in error into machinery A/c.

ix. Cash of N500,000 withdrawn the business owner was completed omitted from the books.

Required:

a. Identify the types of error above (if any).

b. Journalise the entries to correct the above errors.

7.0 REFERENCES/FURTHER READING

Gowthorpe, C. (2014). Business accounting and finance, 3rd edition, Australia: South Western Cengage Learning

Hermanson, R. H., Edwards, J. D., &Salmonson, R. F. (1980). Accounting principles, Dallas Texas: Business Publications, Inc.

Thomas, A. & Ward, A. M. (2012). Introduction to financial accounting, 7th edition, London: McGraw Hill Education

42 UNIT 4

CURRENT ASSETS AND CURRENT LIABILITIES CONTENTS