Accounting mistakes that take place in double-entry bookkeeping are caused by various factors. These mistakes happen accidentally compared to scams cases, which are deliberate. Some accounting mistakes can be detected quickly, while others are tough to identify. For instance, if a trial balance displays different numbers in the debit and credit side, you must understand that there is an accounting mistake, and the error needs to be recognized and solved. Here are six types of common accounting mistakes. Before we proceed further, just so you know our partner is also providing accounting service in Johor Bahru.
Error of Principle in Accounting
Error of concept in accounting took place when one did not follow the principle of accounting. A typical mistake of principle is that one records a transaction to a wrong type of account. For instance, an account recorded a sale of RM2,000 to laundry expenditure accounting. The mistake here is that the RM2,000 was expected to be credited in the company’s sales account. Such a mistake can lead to severe financial problems in your company.
Error of Commission
When you forget or failed to include any entry in your accounting records, you probably will make this mistake. Error of commission occurs when you add a figure that you should deduct when calculating the entries in bookkeeping.
Error of Omission
The error of omission occurs when you omit a transaction partially or entirely. If you sold items worth RM500 to Alice, but there is no record in your books. Hence, this is the error of omission (Also see Tips to Organise Your Accounting Process).
Error of Compensating
Compensating mistakes mutually compensate for one another’s effects. To illustrate, goods are sold for RM5,000, but they are recorded as RM500 on the customer’s account. Likewise, products purchased at RM5,000 and incorrectly recorded on the account of the supplier as RM500. These mistakes compensate each other in the business accounts as RM4,500 deficit on the credit side of your supplier’s account and the debit side of the customer’s account.
Error of Original Entry
This error happens when an inaccurate figure is inputted to the correct account. For example, a transposition mistake where the figures are not recorded in the correct order; recording RM3,500 instead of RM5,300.
Complete Reversal of Entries
This mistake occurs when you make entries in the proper accounts, but the figures for the credit and debit positions are swapped. The credits and debit would be interchanged to make the mistake correct itself to balance the trial balance. These accounting errors might lead to inaccuracy in the business’s financial statements. Reach out to us today to gain the benefits from our accounting firm in Johor Bahru.