Errors Affecting The Trial Balance

ERRORS WHICH DO
AFFECT THE TRIAL

BALANCE
ERRORS WHICH DO AFFECT THE TRIAL BALANCE
CASTING Where the totaling of a set of figures are incorrectly
(OVER/UNDER) stated.
Overcast – the amount is too large
Undercast – the amount is too small
ONE_HALF Where data was posted to only one of the two accounts
POSTING involved in the transaction. [remember a transaction MUST
be posted into TWO accounts]
SAME_SIDE Where data was posted on the same side of both accounts
POSTING involved in the transaction [eg both were debited].
TRANSPOSITION Where data was posted to corresponding accounts, but the

figures on one of the accounts DO NOT match the figures
on the other for that same transaction.
EXAMPLES
OVER/UNDER CASTING The total on the Sales account should be $15600 and
NOT $15,650
ONE_HALF POSTING $250 cash paid by Jones to settle his account was not
recorded in the Cash account
SAME_SIDE POSTING Sale of company van for $8000 was also debited in the
Van a/c
TRANSPOSITION Cash Purchases of $456 had been posted in the Cash

account as $546
The Suspense Account
❑ERRORS that do affect the trial balance require the services of the Suspense account.
❑It holds the cancelling half of the transaction, so as to prevent the clerk from
changing the part of the posting that was already correct.
❑It follows the same rules for double-entry posting

ACCOUNTING PROCEDURES
❑A correction is made in the ledger account containing the error and a matching entry
is made in the suspense account.
❑The suspense account should then be closed and a revised trial balance prepared.
For Example
❑Electricity expenses paid by cheque of $420 was recorded as follows: Dr. Electricity
$240; Cr Bank $420
❑Cash drawings of $500 had been correctly entered in the cash book but no entry
had been made in the drawings account.
The Journal
Date Details Debit Credit
Electricity 180
Suspense 180
Drawings 500
Suspense 500
Suspense
Date Details Folio Amount Date Details Folio Amount
$ $
Electricity 180
Cash 500
Activity –prepare the journal entry to
correct
1. Cash sales of $3,640 had been correctly entered in the cash book but
has been credited to the sales account as $3,240.
2. Rent received of $700 had been correctly in the cash account but had
not been posted to the rent received account.
3. The return inwards account had been undercast by $90
4. The discount allowed column in the cash book total is $90 however, it
was miscalculated as $70
Suspense Account and the Trial
Balance
When the Trial balance totals are not equal and the error cannot be found the
difference between the two sides is entered in the trial balance as a suspense
account until the error is located.
A suspense account is then opened and the difference is placed on the same side as
where it is placed in the Trial Balance.
For Example
In the above trial balance the debit columns add up to be $12,000 whilst the credit column adds up to be
$11,500 which is a difference of $500 this will be entered in the suspense account
cont’d
SOLUTION
Activities
Worksheet
Textbook Chapter 30
Errors & Profits
If errors affect any items in the trading and profit and loss account (e.g. revenue and expense items),
the calculation of the original profit will be affected. If the errors affect any item in the trading account,
then both gross profit and net profit will be affected. If the errors affect any item in the profit and loss
account, then only net profit will be affected. A statement of corrected/revised net profit is usually
prepared.
Statement of corrected Net profit
Statement of corrected net profit for the year
ended…..
$ $
Net Profit XXX
Add: Expenses overcast X
Add: Sales/Revenue undercast X
Add: Purchases overcast +X XX
XX
Less: Expense undercast X
Less: Sales/Revenue Overcast X
Less: Purchases undercast +X (XX)
CORRECTED NET PROFIT X
For example:
On 31 December 2005, assume K. Chan have the following errors were discovered at the end of the
year. The net profit was $13,480.
1. A credit sale of $680 to K. Cheung was completely omitted from the books.
2. Rent was undercast by $200.
The double entries to correct the errors are:
The Journal
Date Details Dr Cr
2005 ($) ($)
Dec. 31 K. Cheung 680
(1) Sales 680
Dec. 31 Rent 200
(2) Suspense account 200
If sales of $680 was omitted from the books, the sales amount would be undercast by $680. The credit
side of the trading account should have been $680 more. Similarly, rent expense was undercast by
$200. Since rent is an item in the profit and loss account, net profit will be overcast by $200.
K. Chan
Statement of Corrected Net Profit
For the year ended 31 Dec. 2005
$
Net profit 13,480
Add: sales undercast + 680
$14,160
Less: Rent undercast (200)
Corrected net profit for the year 13,960
Activity
Activity 2

Errors Affecting The Trial Balance

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ERRORS WHICH DO

AFFECT THE TRIAL

TRANSPOSITION Where data was posted to corresponding accounts, but the

TRANSPOSITION Cash Purchases of $456 had been posted in the Cash

❑It follows the same rules for double-entry posting

The double entries to correct the errors are:

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