NJTC account lecture room
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pickabeau1
Jaru
adsonstone
smithsammy

pickabeau1
Jarus

Let set the ball rolling.
I would like to know the importance of book keeping
Sir, please kindly explain the errors that do not affect the trial balance.

GoldenDr:
Let set the ball rolling.
I would like to know the importance of book keeping
Sir, please kindly explain the errors that do not affect the trial balance.

This is more like it

First of All, let me define what Accounting is about and notice the bolded parts of the definition

Accounting, is the measurement, processing and communication of financial information about economic entities.Accounting measures the results of an organization's economic activities and conveys this information to a variety of users including investors, creditors, management, and regulators.

Keeping records and measuring this information is more or less what book keeping is about - Keeping the books
Historically, all transactions are recorded in what was called Day Books so Sales records will be written in the Sales Journal or Day Book.
On a periodic basis, the summary of these transactions were transferred into General ledger.

these journals were on books hence the term book keeping

Nowdays with computerisation, transactions are booked and relevant entries in the corresponding journals and the GL is updated real time or in some cases batch mode

Errors that do not affect the Trial Balance

- error of omission - That is the debit and credit entries were omitted all together
- error of transition - if the relevant entries are made with wrong figures -
-

You can see more here http://www.accounting-world.com/2012/05/rectification-of-errors-errors-not_29.html

1 Error of omission
Wherein the full transaction is omitted from the books of accounts. For example sold goods to Mr. Z for $100. We neither entered this transaction in sales account nor have we entered in Mr. Z account

2 Error of commission
Kind of error where we have entered the correct amounts but in wrong person’s account. For example sales of goods to Mr. A were entered in Mr. B account

3 Error of principle
This type of error takes place when an item is entered in wrong head or class of accounts. For example purchase of fixed asset is entered in expenses account or sale of fixed asset such as building is entered in sales account

4 Error of compensation
Errors that cancel the effects of each other. For example we might overstate purchases account by $20 and we can overstate sales account by $20 as well. Since we have added $20 to both debit and credit sides of trial balance, the agreement of trial balance is still intact.

5 Error of complete reversal of entries
These errors occur when we debit and credit the two or more aspects of a transaction wrongly using correct figures or amounts. For example we have received cash $500 from Mr. Z. The correct entry should be Cash=Debit and Mr. Z=Credit but we have recorded as Mr. Z=Debit and Cash=Credit. However, the trial balance appears to be balance.

6 Error of original entry
Entering wrong original figure or amount in accounts. For example, a purchase of $100 was entered as $200 in the books of accounts. A $30 sale to Mr. Z was wrongly entered as $50 in sales account and Mr. Z account

7 Error of transition
Error of transition can be defined as switching the sequence of digits of amount or figure of a transaction. For example sales amount to $123 were entered as $321. A purchase of equipment worth $72 was entered as $27 in equipment account and cash account respectively.

This is one of the most common errors and it’s very hard to trace. When both debit and credit of a transaction is affected by the error of transition, trial balance’s debit and credit sides would be equal

nice one pickabeau1

In addition,Book keeping is simply recording of daily transaction as they occur..
Book keeping is quite diffrent from Accounting.
Accounting, is the measurement,
processing and communication of
financial information to enable users make decision...

And who are the users of this information?
We have Government,creditors,debtors,Banks,Firms,Employees,Shareholders e.t.c

Book keeping is the systematic daily recording of transactions.
What are the information needs of these users?

Students, from all the definitions of Book Keeping given above, you will see that "RECORDING" is common. That is the key word. Bear that in mind in the MCQs in the exam.

Recording and transactions are key words to watch out for.

For accounting, if asked to define, the key words you will watch out for in the objectives are, classifying, summarising, presenting and communicating. (sometimes one or two similar words may be used, or one or two of these may be missing. Communicating is hardly missing though. These are things you will watch of in the objectives.

GoldenDr:
Book keeping is the systematic daily recording of transactions.
What are the information needs of these users?

Information Needs of Users of Accounting/Financial Information

1, Management - For decision making on the performance/profitability of the business

2, Existing Shareholders/Investors- To know the performance of the company

3, Potential Shareholders/Investors - To decide whether the company is worth investing in.

4, Government - For taxation and other purposes like regulation

5, Journalists/Media- For analysis of the economy or business

6, Employees - To give an insight into the state of the company, whether it is a going concern, whether the company will continue to meet its obligations to them (salary, benefits etc). A prospective employee can also use it to decide whether to join the company.

7, Creditors - These are banks and other institutions that are planning to or have given loans to the business. They use accounting information to decide whether the company will be able to repay them back.

8, Suppliers - These are people that supply goods to the business. Most times, it is on credit. They use the information to decide whether the company will be liquid enough to pay for the goods bought or to be bought from them.

Nice one Jarus