Errors of omission

Definition and explanation

Errors of omission, as the name implies, mean that one or more business transactions have been either fully omitted from the journal or have been recorded in the journal but not posted to the relevant ledger accounts.

When a transaction is fully omitted from the journal or ledger, it will not appear in the trial balance. Since both debit and credit aspects of the transaction are not recorded in this case, the debit and credit columns of the trail balance will be short by the same amount. Errors of omission often do not disturb the agreement of the debit and credit columns of the trial balance, despite the fact that the accounting records have one or more errors.

Types of errors of omission

An error of omission can be a partial omission or complete omission. Let’s briefly describe both types of this error.

1. Error of partial omission

In case of error of partial omission, the transaction is correctly entered in the book of original entry or journal but not transferred to the relevant ledger accounts. As a result, it exists in the journal but not in the ledger. The error of partial omission may happen in both general and subsidiary ledgers.

For example, an item returned by a credit customer may be correctly recorded in the in the sales returns journal but not credited to the relevant customer’s account.

The errors of partial omission can be easily discovered by a reconciliation of entries recorded in the journal and ledger accounts.

Rectification of partial omission

Since, in case of partial omission, the transaction exists in the journal but not in the ledger, it must be posted from the journal to the relevant ledger accounts in the same way that it would have been posted.

2. Error of complete omission

The error of complete omission occurs when a transaction is not entered in the book of original entry, i.e., the journal or cash book. Since the transaction is missed in the first place, it will not exist in both the journal and ledger.

For example, an item purchased for cash may not be entered in the cash disbursements journal or cash book.

Unlike partial omissions, a complete omission is difficult to locate. They can be revealed only when a statement of accounts is sent to buyers or received from suppliers.

Rectification of complete omission

Since, in case of complete omission, the transaction has been missed in the first place, it must be entered in the relevant journal in the same way that it would have been entered when it originally occurred. The narration of the entry should include the reason for the delay.

Examples of the error of omission

Example 1

A credit memorandum (number 59) for $590, received from Sky Traders, was misplaced, and the entry could not be recorded in the journal. The memo was found three months later on 10 April 2024.

This was an error of complete omission. To rectify this error, Sky Traders recorded the following entry in its journal.

Example 2

Western Company returned goods costing $650 to Eastern Company, a credit supplier. After two business days, Western received a credit note from Eastern and immediately recorded it in its purchases returns journal. However, the company did not post the entry in the debit of the supplier’s account in its accounts payable subsidiary ledger. The error was discovered after a couple of months, when Western received the statement of accounts from Eastern.

This is an error of partial omission. In order to rectify this error, Western debited the account of the relevant supplier, i.e., Eastern Company, in its accounts payable subsidiary ledger.