EPFO APFC 2023 General Studies · Question 45 of 120

Correct — D, (d) Cash sales not recorded in cash book. This is an error of omission, and it is the only option in the set in which nothing was done wrongly because nothing was done at all. The two families are separated by a simple question: was the transaction entered? An error of commission is a mistake made while doing the work — the transaction reached the books, but it reached them in the wrong amount, on the wrong side, in the wrong account, or with a wrong total or a wrong balance. An error of omission is a failure to do the work: the transaction was left out of the books, wholly or in part. A cash sale that never reached the cash book has touched neither the Cash account nor the Sales account, so there is no wrong entry to point to. Within omissions there is a further split that the examiner likes. A complete omission leaves out both aspects of the transaction, so debits and credits stay equal and the trial balance still agrees; that is the case here, and the error will surface only when the cash in hand is counted against the book balance. A partial omission leaves out one aspect — an entry made in the day book but never posted to the ledger — and it does disturb the totals. The rectification shows the same thing from the other end. Putting this right needs the entry that was never made: debit Cash and credit Sales with the amount of the sale, with no suspense account anywhere in it, because no imbalance was ever created. The three errors of commission in this item would each be corrected in a quite different way, and two of them would involve a suspense account if the books had already been balanced. Read the ask carefully. The booklet prints the negation in bold italic in the stem, so the question wants the option that does not belong to the family of errors of commission, and option (d) also contains an unemphasised not of its own. A candidate scanning for the word rather than for the sense can be pulled in either direction here.

• (a)Overcasting of sales book — This is an error of commission of the casting kind. Casting is the totalling of a subsidiary book, and the total of the sales book is what gets posted to the credit of the Sales account, so an overcast means the Sales account is credited with more than the invoices actually add up to. The transaction was recorded — the individual customers' accounts are right — and only the addition went wrong, which is the definition of a mistake made in the course of doing the work rather than a failure to do it. The error is one-sided, since only the Sales account carries the inflated figure, so the credit column of the trial balance will exceed the debit column by the amount of the overcast and the difference will sit in a suspense account until it is traced.
• (b)Credit sales to Ramesh ₹5,000 credited to his account — This is an error of commission of the wrong-side kind, and it is the most instructive option in the set. A credit sale to Ramesh should be debited to Ramesh and credited to Sales, because he now owes the money. Crediting him instead does two things at once: it fails to place the ₹5,000 debit that ought to be there, and it places a ₹5,000 credit that ought not to be there. His account is therefore out by ₹10,000, twice the amount of the transaction, and the trial balance will differ by ₹10,000 rather than by ₹5,000. That doubling is the signature of a wrong-side posting, and a candidate who spots a trial-balance difference that is exactly twice a round figure in the books should look for one. The transaction was recorded, which is what keeps it inside the family of errors of commission.
• (c)Wrong balancing of machinery account — This is an error of commission of the balancing kind. Balancing is the arithmetic of finding the difference between the two sides of a ledger account and carrying it down, and it comes after every entry in that account has been made. A wrong balance on the Machinery account therefore misstates the figure that goes into the trial balance and into the balance sheet, while every underlying entry remains correctly recorded. Like a casting error it is one-sided, so it disturbs the agreement of the trial balance. What it is not is an omission: nothing was left out of the books, and the fault lies in the arithmetic performed on entries that are all present.

Accounting errors are classified by what went wrong rather than by how much damage was done, and the four names a candidate must be able to apply are omission, commission, principle and compensating. An error of omission is a failure to record: complete, where the whole transaction is left out and both aspects are missing, so the trial balance still agrees; or partial, where one aspect is recorded and the other is not — typically an entry made in a book of original entry but never posted — so the trial balance disagrees. An error of commission is a mistake made in recording a transaction that was in fact recorded: a wrong amount entered in a subsidiary book, a posting to the wrong account, a posting on the wrong side, a wrong casting or totalling of a book, a wrong balancing of a ledger account, or a wrong carry forward. An error of principle interchanges capital and revenue items and so puts a correct amount into an account of the wrong class. A compensating error is one whose effect is cancelled by another error of the same amount in the opposite direction. The classification is not an end in itself: it drives the rectification. One-sided errors — those that disturb the equality of debits and credits — are corrected through a suspense account if the books have already been closed off, while two-sided errors are corrected by an ordinary journal entry between the accounts concerned. The three errors of commission in this item happen to be one-sided, and the omission is two-sided, which is a useful reminder that the two classifications cut across each other rather than lining up.

This item and its companion earlier in the accountancy block are a matched pair: one asks which described mistake escapes the trial balance, and this one asks which described mistake is not an error of commission. Together they cover the two questions an examiner can build on error classification, and both reward the same preparation — being able to write out, for any described mistake, the entry that was made and the entry that should have been made. An officer inspecting an establishment's books is doing exactly that, and the reason the distinction earns a place in a recruitment paper is that the correcting entry, and therefore the corrected figure on which a contribution or a levy is computed, depends on which kind of error it was. Note the printing: the negation in the stem is set in bold italic, as it is on every negative ask in this booklet, option (d) carries a second unemphasised negation of its own, and the rupee symbol is printed immediately before the figure in option (b).

• An error of commission is a mistake made in recording a transaction that did reach the books — wrong amount, wrong side, wrong account, wrong casting, wrong balancing or wrong carry forward.
• An error of omission is a failure to record: complete omission leaves out both aspects and the trial balance still agrees; partial omission leaves out one aspect and the trial balance disagrees.
• Cash sales left out of the cash book are a complete omission, corrected by the entry that was never made — debit Cash, credit Sales — with no suspense account involved.
• A posting made on the wrong side throws the trial balance out by twice the amount of the transaction, because the correct entry is missing and an equal opposite entry has been put in its place.
• Casting is the totalling of a subsidiary book and balancing is the arithmetic of closing a ledger account; an error in either is one-sided and disturbs the agreement of the trial balance.
• One-sided errors are rectified through a suspense account once the books have been closed; two-sided errors are rectified by a journal entry between the two accounts concerned.

• Answering the wrong ask — the negation is printed in bold italic and option (d) carries a second, unemphasised negation, so the word not appears twice in the item for two quite different reasons
• Assuming an error of commission always upsets the trial balance; posting the right amount to the wrong account on the right side is an error of commission that leaves the totals equal
• Assuming a complete omission will be caught by the trial balance; it never is, because neither side was entered
• Correcting a wrong-side posting with a single entry for the amount of the transaction, when the account is out by twice that amount
• Treating a wrong casting of a subsidiary book as an error in the ledger; the mistake is in the addition of the book, and it reaches the ledger through the total

Error classification reaches this paper as a one-line negative item with four short descriptions, each drawn from a different sub-class, and it is set alongside a companion item on what the trial balance does and does not disclose. Expect the odd option out to be an omission when the question asks about commission, and a principle or an omission when the question asks which error the trial balance survives. The reliable method is to write the entry actually made under the entry that should have been made, and read the answer off the difference.

No directly related past PYQ was found.

• practice — not a real PYQ

  Goods sold to Naveen for ₹8,000 were entered in the sales book as ₹800. This is an error of

  • (a)complete omission
  • (b)commission
  • (c)principle
  • (d)compensation

  Answer(b) commission — the transaction did reach the books, and the mistake is a wrong amount entered in a book of original entry, which is one of the recognised forms of an error of commission. Because both Naveen's account and the Sales account carry the same wrong figure of ₹800, the error is two-sided and the trial balance still agrees; the correction is a journal entry for the shortfall of ₹7,200 with no suspense account.

• practice — not a real PYQ

  The purchase of goods from Rakesh for ₹3,000 was omitted from the books altogether. The effect on the trial balance is that

  • (a)the debit column will exceed the credit column by ₹3,000
  • (b)the credit column will exceed the debit column by ₹3,000
  • (c)the two columns will differ by ₹6,000
  • (d)the two columns will still agree

  Answer(d) the two columns will still agree — a complete omission leaves out both the debit to Purchases and the credit to Rakesh, so nothing disturbs the equality of the two sides. The error is discovered from the supplier's statement or the unmatched invoice, not from the trial balance, and it is put right by the entry that was never made.