Some errors leave total debits equal to total credits, so the trial balance agrees even though the accounts are wrong. This lesson names the six standard types, shows how to explain each one, and checks what each does to profit. It sits in trial balance and error limits after errors a trial balance can reveal.
Questions may describe an error in words and ask you to name its type, say whether the trial balance would show it, or state its effect on profit.
What are the six errors the totals miss?
| Error type | What went wrong |
|---|---|
| Omission | A transaction was left out of both accounts. |
| Commission | The right amount went to the wrong account of the same class. |
| Principle | The right amount went to the wrong class of account. |
| Original entry | The wrong amount was used in both accounts. |
| Compensating | Two errors cancel each other in the totals. |
| Reversal | The debit and credit accounts were swapped. |
In every case, the debit total and credit total still match. That is why the trial balance cannot see the error.
How to explain one, step by step
- Write the correct entry for the transaction.
- Write what was actually done.
- Compare the accounts. Same accounts but swapped sides is reversal. Same amount on both sides but wrong amount is original entry. Different accounts of the same class is commission. Different class is principle.
- State the effect on the trial balance: agrees, with the reason.
- State the effect on profit, if any.
Worked example
Harapan Hardware pays RM 650 for electricity from its bank account.
Step 1, correct entry: debit Electricity RM 650, credit Bank RM 650.
Step 2, what was done: the debit was posted to the Water account instead, and the credit to Bank was correct.
Step 3, compare: Water and Electricity are both expense accounts, the same class, so this is an error of commission.
Step 4, trial balance: debit 650 and credit 650 were both posted, so total debits equal total credits. The trial balance agrees.
Step 5, profit: water expense is RM 650 too high and electricity expense is RM 650 too low. Total expenses are unchanged, so profit is not affected. The individual expense figures are wrong.
Here is the same method on the other types.
| Transaction | Mistake | Type | Effect on profit |
|---|---|---|---|
| Credit sale of RM 900 | Left out of sales and receivables | Omission | Understated by RM 900 |
| Delivery van bought for RM 14,000 | Debited to motor expenses | Principle | Understated by RM 14,000 before depreciation |
| Invoice RM 540 | Recorded as RM 450 in both accounts | Original entry | Depends on the accounts affected |
| Receipt of RM 300 from a customer | Debit receivables, credit bank | Reversal | None, but both balances are wrong |
| Sales and wages | Each overcast by RM 200 | Compensating | None, but both balances are wrong |
The mistake to watch for
A common slip is to label every wrong-account posting an error of principle.
Mistaken answer: “Rent RM 800 was debited to the rates account. This is an error of principle.”
The student noticed the wrong account and reached for the grander label.
Rent and rates are both expenses, so the correct label is commission. Principle needs a change of class: a capital item charged as revenue expenditure, or the reverse. Ask “what type of account is each one?” before you pick the label.
Check yourself
Try these on paper, then open each answer.
1. Rent of RM 800 was debited to the rates account. Name the error, say whether the trial balance agrees and the effect on profit.
Show answer
Error of commission. Both are expense accounts, so debits and credits still match and the trial balance agrees. Total expenses are unchanged, so profit is unaffected.
2. A computer costing RM 3,500 was debited to office expenses. Name the error and give the effect on profit.
Show answer
Error of principle, because an asset was treated as an expense. The trial balance agrees. Expenses are overstated by RM 3,500, so profit is understated by RM 3,500 before depreciation, and the asset is understated by the same amount.
3. An invoice for RM 275 was recorded as RM 257 in both the sales account and the receivables account. Name the error and state the amount of the effect on profit.
Show answer
Error of original entry. The trial balance agrees because both sides use RM 257. Sales are understated by 275 − 257 = RM 18, so profit is understated by RM 18.
Where this leads next
Now that you can name the errors, learn to fix the totals in recalculating a total after a posting correction. Then try the trial balance practice set. The double-entry and ledger trainer lets you check each posting’s accounts and sides, and the trial-balance and error detective shows when an error is detectable from the totals.
Some students can recite the six names but lose marks when the wording of a question hides the account classes. That is a reasoning habit our teachers can work on in online one-to-one Accounting tuition.