Errors of wrong posting or omission of posting one aspect of transaction to ledger

This type of error arises when a business transaction is properly recorded in the journal, but one of its debit or credit aspects is either posted to the ledger with the wrong amount or not posted to the ledger at all. These errors result in unequal debit and credit amounts in the accounting record, causing a discrepancy in the totals of the debit and credit columns of the trial balance. These errors can, therefore, be traced by preparing a trial balance.

Let’s take a couple of examples to illustrate how these errors happen and how they impact account balances in the general ledger and column totals in the trial balance.

Examples

Example 1 – wrong posting of one aspect of the transaction in the ledger

John Manufacturing Company sold goods amounting to $6,000 to Peter Company and journalized the transaction as follows:

While posting the above transaction from the journal to the ledger, the company’s accountant mistakenly debited the accounts receivable account with $600 instead of $6,000. However, the sales account was credited with the correct amount.

Required: How would this posting error affect the balances of the ledger accounts involved? Would the debit and credit columns of the trial balance agree if these balances are listed therein?

Solution

Effect on the accounts receivable account and the sales account

The accountant at John Manufacturing Company mistakenly debited the accounts receivable account with $600 instead of $6,000. This error would cause the account balance to be $5,400 less than it actually should have been.

The credit part of the entry was posted to the ledger with the correct amount. Therefore, if no other error exists, the sales account would show the correct balance. After posting this transaction to the ledger, the two accounts would look like the following:

Effect on the trial balance

Because the debit balance in the accounts receivable account was understated by $5,400 (= $600 – $6,000), the total of the debit column of the trial balance will be less than the total of the credit column by the same amount. Hence, the two columns of the trial balance would not tally, indicating one or more errors in the company’s accounting records.

Example 2 – omission of posting one aspect of the transaction in the ledger

Maria Trading Company bought goods amounting to $8,500 from Martin Company, a manufacturer of household items. Maria recorded this transaction in its journal correctly but did not post it on the credit side of the accounts payable account in the general ledger. However, the debit aspect of the transaction was correctly posted on the debit side of the purchases account.

Required: Draw up the relevant ledger accounts to show the impact of this error on Maria’s accounting records. How would this error affect the trial balance of Maria Trading Company?

Solution

1. Journal entry to record the credit purchases

Maria made the following journal entry to record the credit purchases:

2. Impact of the error on relevant ledger accounts

The general ledger accounts related to credit purchases are the purchases account and the accounts payable account. Since Maria correctly posted the above transaction to the purchases account but did not post it to the accounts payable account, the impact of the error on these two ledger accounts would look like the following:

3. Impact on the trial balance

Since the credit aspect of the transaction was omitted from the ledger, the balance of the accounts payable account would be understated by $8,500. Resultantly, the total of the credit column of the trial balance would be $8,500 less than the debit column, indicating the presence of one or more errors in the accounting record.