What is an error of original entry?
An error of original entry occurs when the wrong amount is used when debiting and crediting the ledger accounts. Errors of original entry often involve positioning the decimal in the wrong place (e.g. recording £100 instead of £1,000) or transposition errors where the right numbers are used but are recorded in the wrong order (e.g. £45 instead of £54).
When an error of original entry has been found, it can be corrected using either two journals (one to cancel out the effects of the incorrect entries and a second to record what should have been posted in the first place) or a single journal.
Illustration
On 6th March, a business issued a cheque for £1,540 to Jasper, one of its credit suppliers. The bookkeeper recorded this payment as £1,450 in the Cash Book which was then posted to the Bank Control account and to the Purchases Ledger Control account in the General Ledger and to Jaspser’s account in the Purchases Ledger.
The error was noticed by the bookkeeper on 9th March.
Correcting the error using two journals
The first journal will cancel out the effects of the incorrect entries
The second journal will record the entries that should have been made originally.
The journals will then be posted to the General Ledger accounts as shown below (the original incorrect entries are shown in black and the above journals are shown in blue).
The postings and entries in the Purchases Ledger to correct the error are shown below
Correcting the error using one journal
This type of error can also be corrected using a single journal which give the same overall effect of the two journals detailed above. For our above example the journal to be posted to the General Ledger would be:
The postings into the General Ledger accounts would be:
The entries and posting in the Purchases Ledger would be:
The two methods may be examined, so students must be able to use both.
