Correction of Errors

Students who have not mastered double entry bookkeeping are likely to get problems in chapters like suspense account, correction of errors and re-draft balance sheet.

The first thing you should do is to start by learning your double entries. When you know the correct way of recording a transaction, only then will you be able to correct an error for that transaction.

When answering a question on correction of errors, you have to follow the following steps:

1. What is the correct double entry for that transaction?

2. What error has been made?

3. What double entry should be made to correct that error?

Example 1:
The purchase of furniture in cash has been debited to Purchases A/c

Step 1: What is the correct double entry?

Dr Furniture A/c
Cr Cash A/c

Step 2: What error has been made?

Purchases A/c has been debited in error and the Furniture A/c not debited.

Step 3: How to correct the error?

Dr Furniture A/c
Cr Purchases A/c

The Purchases A/c was debited in error. Therefore, to correct the error, the Purchases A/c has been credited.

Furniture is a Fixed Asset. Assets have debit balances. Therefore, debit Furniture A/c.

Example 2:
Goods purchased in cash for $100 were debited to both Purchases A/c and Cash A/c

Step 1: What is the correct double entry?

Dr Purchases A/c
Cr Cash A/c

Step 2: What error has been made?

Cash A/c has been debited in error.

Step 3: How to correct the error?

Dr Suspense A/c by $200
Cr Cash A/c by $200

Example 3:
The purchases account was understated by $50 for goods purchased in cash

Step 1: What is the correct double entry?

Dr Purchases A/c
Cr Cash A/c

Step 2: What error has been made?

The debit side of the Purchases A/c has been understated by $50.

Step 3: How to correct the error?

Dr Purchases A/c $50
Cr Suspense A/c $50

We do not correct the cash account as no error has been made in this account.

Should you require more help on this topic, feel free to tell us!

Regards,
ACCA Tutor