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Hi Sir,
I have a small doubt about Transposition error.
According to notes given by my Lecturer,
Transposition error is where the numbers are inter-changed and recorded in the accounts.
Eg. Payment of $154 or stationary was incorrectly recorded in the accounts as $145.So, if I consider that definition and example, transposition error doesn’t cause imbalance in TB.
But According to BPP:
Transposition errors are errors where figures (digits) are written in the
wrong order in either a credit or a debit entry.This would create an imbalance between credits and debts, and so the error would be indicated by extracting a trial balance.So my question is, if in questions it was just mentioned as a transposition error, do I assume that the mistake was on either a credit or debit entry (hence causing imbalance), unless other wise it’s specified that error was made in both entries?
BPP’s wording is strictly wrong.
If the same figure has been entered as a debit and a credit then the trial balance will still balance.
However, if a question says that an error has been made in a particular account then you assume that the other entry was made correctly. In that case the trial balance will balance.
Always assume that any entries other than the one(s) specifically mentioned have been done correctly.
So if they don’t mention anything about an entry and simply ask if transposition error will be revealed by extracting a trial balance,…. what would be your answer?
This is the question in BPP’s Revision Kit:
15.13 Two types of common errors in bookkeeping are errors of principle and errors of transposition.
Which of the following correctly states whether or not these errors will be revealed by extracting a trial balance?
……….Errors of Principle…………………. Errors of Transposition
A………Will be revealed………………………..Will not be revealed
B………Will be revealed………………………..Will be revealed
C………Will not be revealed…………………..Will not be revealed
D………Will not be revealed…………………..Will be revealedI chose option C, that Transposition error will also not be revealed. (The question doesn’t mention that error was in one entry right?)
This is the answer to that question:
15.13 D
Errors of principle, such as recording a capital expenditure transaction as revenue expenditure, would not be revealed by a trial balance because it would not create an inequality between total debits and total credits. Transposition errors are errors where figures (digits) are written in the wrong order in either a credit or a debit entry.This would create an imbalance between credits and debts, and so the error would be indicated by extracting a trial balance.
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