Page 310 - Accountancy_F5

Chapter Summary
This chapter has provided an in-depth understanding of the correction of accounting
errors, a critical aspect of accounting adjustments. It emphasises that errors, even
unintentional ones, should never be overlooked but corrected promptly. The chapter
has distinguished between errors and frauds. Errors are unintentional mistakes made
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during the preparation of financial records, while frauds are intentional wrong doings
committed with the intention of gaining undue benefits. The chapter has categorised
errors into two types: those that affect the agreement of the trial balance and those
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that do not. Examples of errors that do not affect the trial balance include errors of
omission, commission, principles, original entry, compensating errors, complete
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reversal of entries, and error of transposition. On the contrary, errors that affect the
trial balance include single entry errors, overcasting or undercasting of transaction
figures, and posting of incorrect amounts.

The chapter also has discussed the correction of different types of errors, including
the use of a suspense account. This account is used to post doubtful entries and
discrepancies temporarily until they are analysed and corrected. The importance
of the general journal in the correction of accounting errors is also elaborated. The
general journal plays a crucial role in recording and correcting errors. To enhance
understanding of key issues, the chapter has provided numerous examples, activities,
and exercises, enabling students to grasp and apply well the concept of correcting
accounting errors more effectively.

Revision exercises
1. Accounting errors can be categorised into those that affect the agreement of the
trial balance and those that do not. The correction of these errors sometimes
involves the use of a suspense account, but not always.

Required:

(a) Can you distinguish between errors that affect the agreement of the trial
balance and those that do not?
(b) Under what circumstances would an accountant need to use a suspense
account, and when would it not be necessary?

2. Show the ledger entries necessary to correct the following errors:

(a) A sale of goods TZS 750,000 to January had been entered in Jafari account.
(b) Commission revenue TZS 1,500,000 had been posted in error in the sales
account.

Student’s Book Form Five
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