Accounting error
What is an Accounting Error?
An error is a non-fraudulant act that is generally accepted as a mistake in the accounting record. Accounting errors are unintentional and should be spotted and solved immediately. Errors should not be confused with fraud, frauds are made intentionally.
Types of Accounting Errors
There are lots of accounting errors present. There are some categories of accounting errors that have been discussed below:
Error of Original Entry
The error of original entry occurs when the wrong amount is posted for a transaction. If a transaction of $5200 is recorded as $2500 that will be an error of original entry.
Error of Duplication
If an account is debited and credited twice then it'll be called an error of duplication.
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Error of Omission
The error of omission occurs when an entry is totally omitted and never entered when a transaction takes place. For example, if a company buys something and never recorded that in the journal, that will be an error of omission.
Error of Entry Reversal
Sometimes entries are reversed by a debit account with a credit account. If an item that should be debited is credited and the item that should be credited is debited then the entry will be reversed. For example, if the cost of goods sold is credited instead of debited and finished inventory is debited instead of credited.
Error of Commission
When a bookkeeper record an entry to the right account but the wrong subsidiary account that will be an error of commission. If a company records receiving money from a customer by crediting accounts receivables that are not an error, but if a wrong customer is credited that will be an error of commission.
Compensating Error
if an error is compensated by another error that will be a compensating error. For example, if a wrong amount is debited in the Cost of Goods Sold account and the same amount is also credited by another account.
