Types of Errors
A. Clerical Errors : Clerical errors are those which result on account of wrong posting that is posting an item to a wrong account, totalling and balancing. Such errors may again be subdivided into:
(i) Errors of Omission : An error of omission takes place when a transaction is completely or partially not recorded in books of account. For example, goods purchased from Narendra Kumar were not recorded any where in account books. This error will not affect the agreement of Trial Balance. But if posting is not done in one of the accounts, this will affect the agreement of Trial Balance.
(ii) Errors of Commission : Errors of commission take place when some transaction in incorrectly recorded in books of account. Following are the examples of such errors :
(i) Error in the books of Original Entry.
(ii) Debiting or crediting one account instead of the other. These two errors do not affect the agreement of Trial Balance,
(iii) Wrong balancing of an account.
(iv) Error in writing amount in an account. For example, debiting Prem Chand’ s Account
with Rs. 107- instead of Rs. 100/-.
(v) Casting of the same amount to two accounts.
(vi) Posting of an amount on the wrong side.
(vii) Posting in one account and omitting of posting in the other account.
(viii) Error in carrying forward the total of a subsidiary book or an account from one page to the other.
These errors affect the agreement of Trial Balance.
B. Errors of principle : Errors of Principle take place when a transaction is recorded without having regard to the fundamental principles of book-keeping and accountancy. For example a capital expenditure,say expenses incurred in constructing a godown, may be treated as a revenue expenditure or vice versa,Sometimes adjustments are not taken into consideration while preparing Final Accounts. These are errors of principle. These errors, however, do not affect the agreement of the Trial Balance.
C. Compensating Errors :- Compensating errors arise when an error is counter balanced or compensated by any other error so that the adverse effect of one on debit (or credit) side is neutralised by that of another on credit (or debit) side. For example Rani’s account was to be debited with Rs.10, but it was debited with Rs. 100 similarly Shyam’s account was debited with Rs. 10 instead of Rs.100. Both these errors compensate each other’s deficiency and will not affect the agreement of the Trial Balance.
