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Correction of Errors one approach. Gabrielle Moran 17th April 2010. Sequence of topics. Double Entry including accruals/prepayments to simple P&L and Balance Sheet Incomplete Records Control Accounts – Subsidiary Books Depreciation and Disposal Clubs, Service, Farm Manufacturing

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correction of errors one approach

Correction of Errorsone approach

Gabrielle Moran

17th April 2010

sequence of topics
Sequence of topics
  • Double Entry including accruals/prepayments to simple P&L and Balance Sheet
  • Incomplete Records
  • Control Accounts – Subsidiary Books
  • Depreciation and Disposal
  • Clubs, Service, Farm
  • Manufacturing
  • Correction of Errors
  • Bank Reconciliations
sequence of topics1
Sequence of topics
  • Departmental
  • CVP
  • Cash Flow
  • Product Costing
  • Ratio Analysis
  • Budgeting
  • Published
  • Tabulars
4 questions
4 Questions

Thus with every transaction you come across you

need to decide:

  • What are the two accounts involved?
  • Which type of account is each one?
  • Does the transaction cause an increase or decrease in each account?
  • Therefore is it a Dr or Cr?

Finally make the entry in the relevant accounts

(Handout)

subsidiary books
Subsidiary Books
  • Source documents
  • List
  • Reduce entries in accounts in nominal ledger

(Handout)

trial balance
Trial Balance
  • Arithmetical check on double entry before preparation of Final Accounts and Balance Sheet
  • Obvious there are errors
  • Hidden errors
  • Material amounts
  • Minor discrepancies
suspense
Suspense
  • Trial Balance doesn’t work – make it work temporarily by putting in Suspense A/C
  • Prepare final accounts including errors while somebody searches for errors
  • Correct the errors through double entry NOT by crossing out (illegal!)
types of errors
Types of Errors
  • Read and Explain Pairs
  • Read a little -- Talk a little

(Handout)

approaching the question
Approaching the Question
  • What Happened
  • What should have happened
  • Correction = JOURNAL ENTRY
journal entries
Journal Entries
  • Transfer Suspense Items
  • Highlight Profit & Loss items
  • Highlight Balance Sheet items
suspense account
Suspense Account
  • As per Journal Entries
  • Transfer balance to what buried in – follow double entry rules
adjusting the profit
Adjusting the Profit

Profits

Profits

adjusting the profit1
Adjusting the Profit

Profit as per draft accounts

Add

Less

Corrected Net Profit

sample questions
Sample questions
  • From past exam papers
watch for
Watch for
  • Nature of business
  • Unseen items
  • Switching figures
  • English!