Question

List and briefly describe five errors that are typically made when processing financial transactions.

Answer 1

The five errors that are typically made when processing financial transactions are:

i)Error of omission - This refers to a transaction which is completely left out and not recorded.

ii)Error of commission - This is a transaction which is not correctly calculated for instance the accountant subtracting instead of adding a figure.

iii)Error of principle - This is a transaction which is not done according to the accepted accounting principles. For instance, placing at a category that is inappropriate.

iv)Compensating Errors - This type of error happen / occur when two or more errors ends up cancelling out the effect they have brought in the trial balance.

v)Error of Original Entry - Here the accounts are given correct entries however the entry is made with figures that are wrong.

vi) Entering transactions twice - The outcome of entering a transaction twice is that you either overstate your sales or your purchases and your accounts don’t reflect what actually happened. This can lead you to pay a supplier too much money, to hassle a customer for the wrong amount, or for you to overpay taxes.