Page 111 - Account 10

ii. Errors of Commission
It is the committed error. This type of error takes place when an imaginary transaction
is entered in the original book of account or when a posting is made on the right side but
in wrong account. It will not make any difference in the totalling of trial balance. For
example, when an unreal transaction of any value is entered in the original book, it will
increase both sides of the trial balance with the same amount and will not create the
disagreement. The mentioning of wrong amount of a transaction in the original book is
also an error of commission e.g. payment of salary Rs. 2,300 may be entered in the original
book in extent of Rs. 3,200 in both sides. Similarly, the under-casting of any expense or
over/under casting of any income etc. cannot be revealed by the trial balance.
Key Point The error which occurs due to wrong recording of the transaction either
by wrong amount or in wrong account is called error of commission.

iii. Compensating Errors
When the effect of one error is neutralised by the effect of another error, such errors
are called compensating errors. For example, forgetting to post Rs. 500 on the debit side of
certain account may be compensated/neutralised by under-casting Rs. 500 on the credit
same of another account. Since the first error is neutralised by second error, it will not
affect the trial balance in numerical total and thus, such errors cannot be revealed by a
trial balance.

Key Point The errors on which one effect is cancelled or neutralised by another
effect is called compensating error.

iv. Errors of Principle
When the fundamental principle of accountancy is not followed while recording
a business transaction, it is to be an error of principle. Such an error occurs when an
expense is treated as asset or an asset as expenses or an income as liability or a liability
as an income etc. Similarly, it occurs, when an account to be debited is credited and vice
versa. For example, when salary A/c is credited and cash A/c is debited for the payment
of salary, it is said to be an error of principle. This will not affect the totals of trial balance
because the entry opposes the principle of book keeping. But the amount is allocated to
both sides in the same extent. Thus, the trial balance cannot disclose such type of errors.
Key Point The error which occurs due to violation of accounting principles for
recording the transaction is called error of principle.

v. Errors of Posting in the Wrong Account
If posting of any transactions is made in the wrong account but on the correct side, the
errors will not affect the total balance of trial balance. For example, machinery purchased
from Suman for Rs. 15,000 is credited to Raman account in the ledger. In this case, trial
balance will agree but it is error.

Key Point The error which occurs due to record in the wrong account by on the
correct side is called errors of posting in the wrong account.

110 Aakar’s Office Practice and Accountancy - 10 Trial Balance 111