Errors of double posting from journal to ledger

Definition and explanation

In this error, a transaction is correctly recorded in the journal, but one of the debit or credit parts of the entry is erroneously posted twice to the ledger. For example, merchandises sold to a credit customer are correctly entered in the journal but mistakenly debited twice to the accounts receivable account in the ledger.

This type of accounting error causes a discrepancy in the debit and credit totals for the relevant accounting period and, therefore, can be detected by preparing a trial balance.

If both debit and credit parts of the entry are posted to the ledger twice, the two compensating errors will come into existence. In such a situation, both errors will cancel out each other, and they will not be detected by the trial balance.

Let’s take an example to further explain how an error of double posting can affect the company’s ledger and trial balance.

Example

Sky Inc., a trading company, purchased merchandise amounting to $6,500 from Heaven Company on a credit basis and recorded the following entry in its journal:

However, while posting the above journal entry to the ledger, Sky’s accountant mistakenly credited the accounts payable account twice. The debit part of the entry was correctly posted to the purchases account.

Required: Draw up the purchases account and the accounts payable account to show the impact of the above accounting error. Also explain how this error would affect Sky’s trial balance.

Solution

The bookkeeper at Sky Inc. has made an error of double posting. The purchases account and the accounts payable account would look like the following:

1. Relevant ledger accounts

2. Effect on Sky’s trial balance

Since the accounts receivable account has an excess credit of $6,500, its balance would be overstated by the same amount. If this overstated balance is carried forward to the trial balance, the credit column will show a $6,500 higher total than the debit column. Since debit and credit totals will not tally, a trial balance can help reveal this error.