Lesson Notes By Weeks and Term - Senior Secondary 1

Term: 2^nd Term

Week: 10

Class: Senior Secondary School 1

Age: 15 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Financial accounting

Topic:-       Correction of errors

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

1. Discuss the errors that will not affect the agreement of the trial balance
2. Discuss the errors that will affect the agreement of the trial balance

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

NOTE

THE TRIAL BALANCE AND ERRORS

When the totals of the debit column and the credit column of the Trial Balance agree, it indicates that the double entry bookkeeping is arithmetically correct.

A. If the trial balance balances:

When a trial balance balances, it simply means that the total of the debit balances is equal to the total of the credit balances. However, the balancing of the trial balance is not proof that the entries in the ledger accounts are completely free from errors. The Trial Balance will still balance if any of the following errors are made.
Errors that will not affect the Agreement of the Trial Balance

1. Error of Omission
   This occurs when a transaction has been completely omitted from the accounting records. i.e. the debit entry and the credit entry were not posted e.g. Goods sold for cash N7, 000 was not debited to the cash account and not credited to the sales account.
2. Error of Commission
   This occurs when a transaction is posted into a wrong account which belong to the same class as the account to which the posting should have been made. This type of error mostly affect personal accounts i.e. accounts of customers and suppliers e.g. Goods sold on credit to AdebolaN5, 000 debited to Ademola’s account
3. Error of Principle
   This occurs when a transaction is posted to a wrong account of a different class with the correct account to which the posting should have been e.g. payment of cash for furniture purchased N10, 000 debited to purchases account.
4. Error of Original entry
   This occurs when the wrong amount is posted in double entry to record a transaction or when a wrong amount is made in a book of prime entry for a transaction.e.g. goods sold for cash N50, 000 was recorded in both the Cash Account and Sales Account as N5, 000.
5. Complete Reversal of Entry
   This occur when a transaction is recorded on the wrong side of the ledger for both the debit and credit entries. i.e. an account which should have been debited has been credited, and the account which should have been credited is debited e.g. Payment of N9, 000 received form Gloria is debited to Gloria’s account and credited to Cash Account
6. Compensating Errors
   This occurs when error(s) on one side of the ledger is completely cancelled out (or offset) by error(s) on the other side of the ledger e.g. Sales Account was overstated by N4, 000 while Rent Account was also overstated by N4, 000
7. Error of Duplication of Entries
   This occurs when the double entry records for a transaction is made more than once in the books of account e.g. Sale of goods on credit to AdesuaN7,000 was debited twice in Adesua’s Account and also credited twice in Sales Account.

B. If the Trial Balance fails to balance

When the totals of the debit balances and the credit balances did not agree, it is obvious that an error has been made somewhere.

NB: Error in accounting terminology is used to signify mistakes made while recording and/or posting financial transactions. Error is not the same as fraud. Fraud is a deliberate effort and/or attempt to change or modify financial information (or records) for someone personal gains to the detriment of others.

Errors are genuine mistakes that are not deliberate or pre-planned but which occur in the course of recording financial transactions. Errors in accounting are of two types. Those that affects the agreement of the trial balance and those that do not affect the agreement of the trial balance.

Errors that will affect the Agreement of the Trial Balance

1. Single entry or Lone entry
2. Casting errors i.e. overcasting or undercastingof figures
3. Transposition Errors
4. Omission of a ledger balance in the Trial Balance
5. Recording a correct balance of an account in the wrong column of the Trial Balance.
6. Recording the wrong balance of a ledger account in the Trial Balance.
7. One-sided duplication of entry.
8. Transfer of wrong totals from the subsidiary books into the ledger.
9. Bringing down of a wrong opening balance in a ledger account.

EVALUATION :   1. Discuss the errors that will not affect the agreement of the trial balance

2. Discuss the errors that will affect the agreement of the trial balance

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively