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The types of errors that are not revealed by the trial balance Essay

6. Briefly describe the types of mistakes that NOT revealed by the test balance. For each type of mistake, show the consequence of rectifying the mistake in expanded accounting equation. Please provide illustration in explicating your replies.

Trial balance is a list of all the leger history balances. It is usually prepared at the terminal of the accounting period to enable us to fix the fiscal statements of the concern. The balances of all legers are put into debit and recognition columns. The general ground of fixing a test balance is to prove the truth of the leger by demoing whether entire debits equal to credits. In order to corroborate that dual entry has taken topographic point for each dealing, the entire debit entries must be equal to entire recognition entries. Example of test balance are shown at below:

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Company ABC

Trial Balance as at 31 December 2014

Particulars

Debit

( RM )

Recognition

( RM )

Cash

12000

Office equipment

5000

Debtor

550

Creditor

2700

Purchase

4000

Drawings

400

Rental

1200

Wagess

2400

General disbursals

375

Bank

7500

Gross saless

9000

Gross saless returns

100

Avant-garde

4500

Purchases returns

500

Capital

25825

Entire

38025

38025

There are two type of mistakes normally found in the procedure of fixing fiscal statement, which are mistakes that revealed by the test balance and mistakes that are non revealed by the test balance. In this assignment, we merely discuss the mistakes that are non revealed by the test balance.

  1. Mistake of skip– a dealing that is wholly non entered in the books at all.

Example: Buy a motor new wave by hard currency for RM 70000 concern usage. This dealing was non recorded in the books.

Cash

RM

Motor new wave ( Correction ) 70000

Motor Van

RM

Cash ( Correction ) 70000

Since the dealing was wholly omitted from the books, the lone manner to do the rectification is by entering the dealing in the books utilizing the dual entry regulations. Hence, the plus, motor new wave is increase RM 70000 and another plus hard currency lessening RM 70000.

  1. Mistake of rule– a dealing that is entered in incorrect class of history.

Example: A amount of RM 700 paid for fixs of machinery was wrongly debited into the machinery history.

Machinery History

RM RM

Cash ( Wrong entry ) 700 Repairs ( Correction ) 700

Repairs Account

RM

Machinery ( Correction ) 700

Machinery is an plus to the concern whereas fixs of machinery categorize as disbursals. Even though the dual entry for an addition in both history is debited to the several histories, but they are different classs. The mistakes is corrected by crediting the machinery history. The consequence of this mistake is to call off the mistake and the fixs history is debited to demo the right entry.

  1. Mistake of committee– the entries are made at the right sum and appropriate side but to the incorrect history of the right class. Under this type of mistake, the dual entry regulation is followed right.

Example: A sale of goods deserving RM 5000 to Mr Rex was wrongly entered into Mr Tex history due to a error.

Mr Rex Account

RM

Mr Tex ( Correction ) 5000

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Mr Tex Account

RM RM

Sale ( Wrong entry ) 5000 Mr Rex ( Correction ) 5000

Mr Rex and Mr Tex are both personal histories of the same class. Mr Tex history is credited RM 5000 to call off off the mistake and Mr Rex history is debited RM 5000 to demo the right entry.

  1. Mistake of original entry– the original sum was wrongly entered in the books of original entry ( or book premier entry ) and the incorrect sum was right posted to the leger utilizing the double-entry system.

Example: Purchase of goods cost RM 920 from Mei Mei Enterprise were wrongly recorded in the Purchases Journal as RM 902. The incorrect sum was posted to the leger.

Purchases

RM

Mei Mei Enterprise 902

Mei Mei Enterprise ( Correction ) 18

920

Mei Mei Enterprise

RM

Purchases 902

Purchases ( Correction ) 18

920

Initially, the two histories were recorded utilizing an wrong figure where both histories were understate by RM 18. This mistake is corrected by adding back the understate sum.

  1. Mistake of reversal of entries– dealing are entered in the histories utilizing the double-entry system but they are entered in complete reversal. An history that should be debited is credited and frailty versa.

Example: A check received from a debitor, Sin Keat, entire sum of RM 3000 was wrongly credited to the bank history and debited to Sin Keat’s history.

Sin Keat

RM RM

Bank ( Wrong entry ) 3000 Bank ( Correction ) 6000

Bank

RM RM

Sin Keat ( Correction ) 6000 Sin Keat ( Wrong entry ) 3000

In rectifying this type of mistake, the sum involved should be doubled, that is RM 3000 x 2. The first RM 3000 is to call off the mistake and the 2nd RM 3000 is to bespeak the right entry. Therefore, the plus, bank addition RM 3000 while another plus, debitor lessening RM 3000.

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The types of errors that are not revealed by the trial balance Essay
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6. Briefly describe the types of mistakes that NOT revealed by the test balance. For each type of mistake, show the consequence of rectifying the mistake in expanded accounting equation. Please provide illustration in explicating your replies.

Trial balance is a list of all the leger history balances. It is usually prepared at the terminal of the accounting period to enable us to fix the fiscal statements of the concern. The balances of all legers are put into debi

2018-10-23 19:52:53
The types of errors that are not revealed by the trial balance Essay
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