Different types of errors in the double entry accounting system

Errors can occur in a book-keeping system, because individuals make mistakes. The types of error that will appear in the accounting records can be classified into four broad categories these are:

1. Errors of transposition
2. Errors of omission 
3. Errors of commission
4. Errors of principle     

Errors of transposition (transposition errors)

This involves getting the digits in a number the wrong way round, for example recording Rs. 9,700 as Rs. 7,900. Sometimes the error will be made in both the debit and the credit entries in the ledger. For example a purchase invoice might be recorded as Rs. 1,650 instead of Rs. 1,560 in both the purchases account and the payable ledger control account. The trial balance will not reveal this sort of error. Sometimes the error of transposition will be made in one account but not the other. For example, a payment of Rs. 1,980 from a customer might be recorded correctly in the cash book but posted incorrectly as Rs. 1,890 in the receivables ledger control account.

Errors of omission

This is where a transaction or entry is missed out. Sometimes a transaction is missed out of the ledger entirely because the bookkeeper forgets about it or is not informed about it. A transaction may be omitted from one location only. 

Errors of commission.

This means putting an entry in the wrong account, for example recording a telephone expense in the electricity expenses account. Similarly, discounts received might be recorded incorrectly in the discounts allowed account. 

Errors of principle. This is where an entry is recorded in the wrong type of account, e.g. recording capital expenditure as revenue expenditure. For example the purchase of a machine might be entered in the machinery repairs and maintenance account. Unless corrected, this error will result in an incorrect computation of depreciation charges, running costs and profit for the period.