Fundamentals of Financial and Cost Accounting · Adjustment Entries and Rectification of Errors

Errors in Accounting and Their Types

Updated 10 October 2026 · Fact-checked

Errors in accounting are mistakes made while recording, posting or totalling transactions. The main types are errors of omission, commission, principle and compensating errors. To solve a question, find what was done wrong, check whether total debits still equal total credits, then classify the error as one that affects the trial balance or not.

Understand Errors in Accounting and Their Types

An error is an unintentional mistake in the books. It is different from fraud, which is deliberate. Errors happen when you record a transaction, post it to a ledger, or total an account.

The first big split is by effect on the trial balance. A trial balance only checks that total debits equal total credits. So an error that upsets this equality is disclosed by the trial balance. An error that keeps debits equal to credits stays hidden.

Error of omission: a transaction is left out of the books. If it is left out completely (no debit, no credit), the trial balance still agrees. If only one side is left out (partial omission), the trial balance disagrees.

Error of commission: a mistake in recording or posting, such as a wrong amount, posting to the wrong side, posting to the wrong account of the same type, or a wrong total. Some of these affect the trial balance and some do not. Posting to the wrong personal account (Ravi instead of Rahul) does not affect it. Posting ₹5,000 as ₹500 on one side only does.

Error of principle: an accounting principle is broken, usually by treating capital as revenue or revenue as capital. For example, buying furniture and debiting it to Purchases. Both sides are recorded for the same amount, so the trial balance agrees.

Compensating errors: two or more errors that cancel each other out. For example, Sales account over-added by ₹1,000 (credit side too high) and Rent account over-added by ₹1,000 (debit side too high). The two errors offset each other, so the trial balance agrees even though both accounts are wrong.

A second way to classify is one-sided and two-sided errors. A one-sided error affects only one account (a wrong total, or a posting on one side only). On its own, it disturbs the trial balance. It stays hidden only if another error offsets it, which is a compensating error. A two-sided error affects two accounts, one debited and one credited. If the debit and the credit are wrong by the same amount, the trial balance still agrees. If they are wrong by different amounts, the trial balance is disturbed.

Key formulas to remember

Errors not affecting the trial balance: Complete omission, error of principle, compensating errors, posting to the wrong account of the same nature (commission), and equal wrong amount on both sides; Debits and credits stay equal, so the trial balance agrees and the error stays hidden.
Errors affecting the trial balance: Partial omission, one-sided posting, wrong amount on one side only, wrong totalling or balancing (unless offset by another error), a wrong balance carried to the trial balance (unless offset by another error); Total debits no longer equal total credits. The difference is put in a Suspense Account until the errors are found. If another error offsets a wrong total or balance, the errors are compensating and the trial balance still agrees.
One-sided vs two-sided errors: One-sided = one account wrong. Two-sided = two accounts wrong, one on the debit and one on the credit.; A one-sided error disturbs the trial balance unless another error offsets it. A two-sided error does not disturb it if debit and credit are wrong by equal amounts, but does if the amounts differ.
Four classic types: Omission | Commission | Principle | Compensating; Learn one-line meanings of each; options in MCQs are built from these.

How to solve Errors in Accounting and Their Types questions

Use this method for any question that asks you to name the type of an error or say whether the trial balance is affected.

1Write down the correct entry for the transaction (which account should be debited and credited, and for what amount).
2Write down what the books actually show.
3Compare the two. Find which accounts are wrong and by how much.
4Check whether the wrong entry still has equal debit and credit. If yes, the trial balance agrees. If only one side is wrong, it does not.
5Classify: transaction missing = omission; wrong amount, side or account of the same nature = commission; capital/revenue confusion = principle; two errors cancelling = compensating.
6Choose the option that matches both the type and the trial balance effect asked in the question.

Quickest way: Two-question shortcut

When to use it: Use this when you have about a minute per MCQ and the options list error types or trial balance effects.

Ask first: is the entry one-sided? If one side is missing or wrong alone, the trial balance is affected.
If both sides are present with the same amount, ask: is the wrong account of a different nature (capital vs revenue)? If yes, it is an error of principle.
If the right nature is used but the wrong person or account, it is commission.
If nothing was recorded at all, it is complete omission.
If the question mentions two mistakes offsetting each other, pick compensating.

Common mistakes in Errors in Accounting and Their Types

Saying every error of omission is hidden from the trial balance.
Students remember the complete omission case only.
Fix: Check whether both sides were omitted. Only complete omission leaves the trial balance unaffected. Partial omission disturbs it.
Calling a wrong posting to another account an error of principle.
Both involve a wrong account, so they look alike.
Fix: Principle needs a capital/revenue (or similar nature) mistake. Posting to another account of the same nature is commission.
Thinking compensating errors mean the books are correct.
The trial balance agrees, so students assume all is fine.
Fix: Remember that individual account balances are still wrong even though the totals match.
Treating errors of commission as never affecting the trial balance.
The popular example is posting to the wrong customer.
Fix: Wrong amounts on one side, wrong totals and one-sided postings are commission errors too, and they do affect it.
Confusing errors with frauds.
Both make books incorrect.
Fix: Errors are unintentional. Deliberate manipulation is fraud and is not an error type.

Worked examples

Example 1

Purchase of office furniture for ₹20,000 was debited to Purchases Account. Identify the type of error and state whether it affects the trial balance.

Show the solution

Correct entry: Furniture A/c Dr ₹20,000 to Cash/Bank A/c ₹20,000.
Actual entry: Purchases A/c debited ₹20,000, cash credited ₹20,000.
Both sides have the same amount, so debits equal credits.
Furniture is a capital item but was treated as a revenue item (purchase of goods).
This breaks the capital versus revenue principle.

Answer: It is an error of principle and it does not affect the trial balance.

Example 2

Sales Account was over-added by ₹3,000 and Commission Received Account was over-added by ₹3,000 in the books. Name the error and say whether the trial balance is affected.

Show the solution

Sales is a credit balance and is overstated by ₹3,000.
Commission Received is also a credit balance, overstated by ₹3,000.
Both errors are on the credit side, so they do not compensate each other.
Total credits are higher by ₹3,000 + ₹3,000 = ₹6,000, so the trial balance will not agree.
Each is a one-sided error of commission (wrong totalling).

Answer: These are one-sided errors of commission (wrong totalling), not compensating errors. They affect the trial balance, which shows credits ₹6,000 more than debits.

Exam tips

Always check whether both debit and credit are recorded before choosing the trial balance effect.
Learn one example for each type; many MCQs reuse the same classic examples.
If the question says 'which error is not disclosed by the trial balance', eliminate options with one-sided postings or wrong totals first.
When two errors are described, test whether they sit on opposite sides with equal amounts before calling them compensating.
Do not overthink: with no negative marking, always mark your best option.

Practice questions from Adjustment Entries and Rectification of Errors

Errors in Accounting and Their Types: frequently asked questions

What are the four types of errors in accounting?

They are errors of omission, commission, principle and compensating errors. Omission means a transaction is left out. Commission is a wrong recording or posting. Principle is a breach of an accounting principle, and compensating errors cancel each other.

Which errors do not affect the trial balance?

Complete omission, errors of principle, compensating errors, and errors of commission where the wrong account of the same nature is used with equal debit and credit. In each case total debits still equal total credits.

What is the difference between one-sided and two-sided errors?

A one-sided error affects only one account, such as a wrong total or a posting on one side only. On its own it disturbs the trial balance, unless another error offsets it. A two-sided error affects two accounts, one debit and one credit. It leaves the trial balance unaffected if both are wrong by the same amount, and disturbs it if the amounts differ.

Is an error of commission always disclosed by the trial balance?

No. Posting to the wrong personal account does not disturb it, but a wrong amount on one side does. Check each case separately.