Numerous errors may exist even though the trial balance columns agree. Which of the following is not one of these types of errors?
a. A transaction is not journalized.
b. Transposition error related to the statement of financial position.
c. A journal entry is posted twice.
d. A journal entry to purchase $100 worth of equipment is posted as a $1,000 purchase.
The correct answer and explanation is :
The correct answer is b. Transposition error related to the statement of financial position.
Explanation:
When a trial balance is prepared, the debit and credit totals are checked to ensure they agree. However, even if the trial balance columns agree, it does not guarantee that all financial transactions have been correctly recorded. Several types of errors can occur, even though the trial balance still balances, and these errors are important to understand in accounting.
- A transaction is not journalized (Option a):
- This is a potential error that can occur if a financial transaction is omitted from the journal entirely. Even though the trial balance may agree, a missing transaction means that one side of the equation (either the debit or credit) has not been entered, leading to incomplete financial records. Since the trial balance only checks for totals, not the completeness or correctness of individual transactions, this error might go unnoticed.
- Transposition error related to the statement of financial position (Option b):
- A transposition error occurs when digits in an amount are reversed, such as recording $540 as $450. However, transposition errors are typically related to the recording of amounts in the ledger or journal, not the statement of financial position (balance sheet). The statement of financial position itself is a result of correct journal entries and postings. Thus, a transposition error is more likely to occur in the recording or posting process, not in the final presentation of financial statements, making option (b) the correct answer as it is not a typical error related to the trial balance columns.
- A journal entry is posted twice (Option c):
- If a journal entry is posted twice, the total of both the debits and credits would still agree, but the amounts would be double-counted. This can cause inflated balances and is an error that might go unnoticed in a trial balance, as the trial balance does not check the correctness of individual transactions.
- A journal entry to purchase $100 worth of equipment is posted as a $1,000 purchase (Option d):
- This error is an example of an amount misstatement. In this case, the journal entry has been posted with the wrong value, but both the debit and credit sides of the trial balance still agree. This error will affect the accuracy of the financial records but will not impact the trial balance total, since the incorrect debit and credit still balance each other out.
Conclusion:
Errors like omission of transactions, double postings, and misstatements in amounts are common, but transposition errors related to the statement of financial position are not typically errors that would cause an imbalance in the trial balance. Therefore, option b is not one of the types of errors that could occur even when the trial balance columns agree.