Question

What do you mean by accounting error and explain the different types of error with example?

Answer 1

1 answer :-

What is an Accounting Error

An accounting error is an error in an accounting entry that was not intentional. When spotted, the error is often immediately fixed. If there is no immediate resolution, an investigation into the error is conducted. An accounting error should not be confused with fraud, which is an intentional act to hide or alter entries for the benefit of the firm.

BREAKING DOWN Accounting Error

There are numerous types of accounting errors. The most common (with simple examples):

Error of omission: an accounts payable account is not credited when goods are purchased on credit

Error of commission: an account receivable is credited to the wrong customer

Error of original entry: the wrong amount is posted to an account

Error of accounting principle: an equipment purchase is posted as an operating expense item

Compensating error: a wrong amount in inventory is balanced by a wrong amount in accounts payable

Error of entry reversal: cost of goods sold is credited instead of debited and finished inventory is debited instead of credited

Error of duplication: depreciation expense is debited twice.

2. Answer :-

What is an accounting error?

An accounting error is a non-fraudulent discrepancy in financial documentation. The term is used in financial reporting.

Types of accounting errors include:

Error of omission -- a transaction that is not recorded.

Error of commission -- a transaction that is calculated incorrectly. One example of an error of commission is subtracting a figure that should have been added.

Error of principle -- a transaction that is not in accordance with generally accepted accounting principles ( GAAP). One example of an accounting error of principle is an expenditure that is placed in an inappropriate category.

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