How to correct errors not shown by the trial balance

Step by step

1. Identify the type of error. Decide which of the six errors it is. This tells you what the correct entry should have been.
2. Work out what was recorded. Write down the entry that was actually made, right or wrong.
3. Work out what should have happened. Write down the correct double entry for the transaction.
4. Journalise the correction. Make the journal entry that moves the accounts from the wrong position to the right one.
5. Note that the trial balance was unaffected. These errors do not need a suspense account, because debits and credits were always equal.

Worked example

A purchase of a machine was posted to the purchases account. This is an error of principle. To correct it, debit machinery and credit purchases.

Understanding the method

The trial balance only checks that total debits equal total credits. It does not check that entries are complete, sensible or in the right accounts. So these six errors keep both totals equal and stay hidden.

An error of omission: a transaction left out completely. Commission: the right amount on the right side, but in the wrong account of the same type. Principle: posted to the wrong class of account, such as capital treated as revenue.

Original entry: a wrong figure copied from the source document into both accounts. Complete reversal: debit and credit swapped. Compensating: two separate mistakes that cancel each other out.

The correcting journal is the difference between what the books say and what they should say. Ask which account is overstated and needs reducing, and which is understated and needs increasing.

The debit and credit that fix both are your entry. No amount was missing, so suspense is not used.

Exam questions describe the mistake without naming it. A repair to a delivery van debited to the motor vehicles account is an error of principle, because revenue expenditure was treated as capital expenditure. The fix debits repairs and credits motor vehicles.

Cash received from A. Rahim credited to A. Karim is an error of commission. The fix debits Karim and credits Rahim.

Here is a worked case with two errors. First, the business paid RM1,800 for repairs to office equipment and made no entry at all. This is an error of omission.

Debit repairs RM1,800 and credit bank RM1,800.

Second, a credit sale of RM640 to K. Lim was recorded as RM460 in both the sales account and Lim's account. This is an error of original entry. Both accounts are RM180 too low (640 − 460).

Debit K. Lim RM180 and credit sales RM180. Correct only the difference, because the RM460 is already in the right place.

For a complete reversal, post double the amount: once to cancel the wrong entry and once to record the right one. For a compensating error, two separate corrections are needed, one for each mistake.

To check, add your correction to the current balance and see whether the account now shows what the transaction required. If a suspense account appears in your answer for one of these six errors, you have probably misclassified the error.

Common mistakes: leaving out the narrative, which examiners treat as part of the journal, and halving or doubling an original-entry difference. Another is treating a compensating error as a single correction.

If you find it hard to name the type of error from a short description, we can help. One of our teachers can practise classifying and correcting errors with you until the six types feel familiar. Book a trial class

Related skills

• How to correct errors using a suspense account
• How to write a journal entry
• How to prepare a trial balance

The methods here are standard accounting practice, with original figures. For your exam board's exact requirements, see exam boards and Sources.