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Here are some of the types of errors that are committed in recording business transactions:
1. Errors of omission: Error of omission is committed when an entry gets omitted during recording in the book of original entry or during posting of the transaction. Two types of errors of omission are there, namely,
Partial omission: A transaction that is correctly recorded in one side of account but not recorded in the other side of the account. For example, goods sold to Manjunath recorded in sales but omitted to be recorded in ManjunathтАЩs account. It affects the trial balance.
Complete omission: When a transaction gets completely omitted to be recorded in the books, then it is the case of complete omission. For example, transaction related to purchase of goods from Rajesh is not recorded in the purchases book. Such omissions does not affect the trial balance.
2. Errors of principle: Errors committed when recording of transactions in the book of the original entry is done against the accounting principle. Such errors affect the trial balance.
When proper distinction is not made between revenue income or expenditure and capital income or expenditure. These are of two types:
When revenue transactions are treated as capital transactions and when capital transactions are treated as revenue transactions. For example, repairs made to machinery, recorded in machinery account.
3. Errors of commission: Errors committed when transactions are recorded with wrong amounts, wrong posting, wrong balancing, and/or wrongly carry forwarded.
These are of two types:
Trial balance does not agree: One sided errors result when trial balance does not agree, it affects one account
Trial balance agrees: When the trial balance agrees it should not be thought that there is no error. Although arithmetic errors will not be there, but there can be some other types of errors which are not easily detectable. These errors arise due to recording wrong amount in the original book.
4. Compensating errors: Compensating errors occur when effects of one error are cancelled by the effects of another error of an equal amount. For example, Mr. YтАЩs account was credited by Rs 1,000 instead of 100 and Mr. ZтАЩs account was credited by Rs 100 instead of 1,000. In this case, the error in Mr. YтАЩs account will be compensated by the error in Mr. ZтАЩs account.