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By the end of this topic, you should be able to:
A journal is a book of prime entry — it is where you first record a correction before posting it to the ledger accounts. When an error is discovered, you do not cross out the original entry. Instead, you write a journal entry that fixes the mistake properly.
Every journal entry has:
Some errors are sneaky — they don't cause the trial balance to disagree, so you won't notice them just by checking totals. These errors always have a debit and a credit of equal value, so the two sides of the trial balance still match. You need to correct these using simple journal entries (no suspense account needed).
There are six types of errors that do not affect the trial balance:
What it is: A transaction is completely left out of the accounting records. Nothing was recorded — no debit, no credit.
Why it doesn't affect the trial balance: Because nothing was recorded, both the debit total and credit total are equally unaffected.
How to correct it: Simply record the transaction as if you're doing it for the first time.
Example: The purchase of a motorbike for USD 10,000 by cheque was never recorded.
Journal Entry:
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| 1 Feb | Motor Bike | USD 10,000 | |
| Bank | USD 10,000 | ||
| To correct an error of omission — purchase of motorbike not recorded |
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