POBC - Recaps - Error types

A transaction was mistakenly coded as electricity instead of gas. This mistake will affect the trial balance

• True

• False

Answer explanation

The double entry would have been done as follows: Debit Electricity; Credit Bank. The trial balance would have been unaffected therefore.

A business paid for inventory purchases, £15,000. This was recorded in Bank account only. This mistake will affect the trial balance

• True

• False

Answer explanation

This would have been recorded as follows: Ban: Credit £15,000.

There is no entry done for the debit. Cleary one can see that this is against the double entry rules. Trial balance will THEREFORE be affected.

The only reason why a suspense account occurs is because somehow the duality rule is broken.

• True

• False

A business paid for rent, £10,000. They debited Bank and credited Rent. This mistake will affect the trial balance

• True

• False

Answer explanation

If Bank is debited with £10,000 and Rent is credited with the same £10,000, the double entry is complete, even when the numbers have been posted on the wrong sides for both accounts. The trial balance will not be affected by this mistake.

A sales invoice has been mistakenly posted in the sales day book as £2,400 (including VAT), instead of £24,000. This mistake will affect the trial balance

• True

• False

Answer explanation

The postings to the general ledger would have been:

Dr RLCA - £2400

Cr Sales - £2,000

Cr VAT - £400

As you can see, double entry is complete with both debit and credit sides totalling £2,400. THEREFORE the trial balance will not be affected.

Totals column of a sales daybook has been incorrectly added to £4,080 (instead of £4,800). This error will affect the trial balance.

• True

• False

Answer explanation

The postings to the general ledger would have been:

Dr RLCA - £4,080 (incorrect)

Cr Sales - £4,000 (correct)

Cr VAT - £800 (correct)

As you can see, double entry rule is broken because the totals debited and credited are not the same. Total debits was £4,080 and total credits was £4,800. THEREFORE the trial balance will be affected.

Suspense account is a wrong account and therefore needs to be corrected.

• True

• False

Answer explanation

Suspense account is a account created by the accountant temporarily to make the trial balance balance. It is not a wrong account but indicates that error has been made somewhere.

Totals column of a purchase returns daybook has been incorrectly added to £306 (instead of £360). This error will affect the trial balance

• True

• False

Answer explanation

The postings to the general ledger would have been:

Dr PLCA - £306 (incorrect)

Cr Purchase Returns - £300 (correct)

Cr VAT - £60 (correct)

As you can see, double entry rule is broken because the totals debited and credited are not the same. Total debits was £306 and total credits was £3,600. THEREFORE the trial balance will be affected.

A credit customer paid the business £6,000. This was recorded by debiting receivables and crediting bank. This type of error is called

• Commission

• Principle

• Reversal

• Same-side

Answer explanation

The postings to the general ledger would have been:

Dr PLCA - £306 (incorrect)

Cr Purchase Returns - £300 (correct)

Cr VAT - £60 (correct)

As you can see, double entry rule is broken because the totals debited and credited are not the same. Total debits was £306 and total credits was £3,600. THEREFORE the trial balance will be affected.

Totals column of VAT in the Discounts Allowed daybook has been incorrectly added to £405 (instead of £450). This error will affect the trial balance

• True

• False

Answer explanation

Incorrectly adding up a column in the daybooks will result in the wrong figure posted in the general ledger. This will in turn result in the trial balance not balancing.