6. Correction of Errors

1. Types of errors

1-1 Errors where Trial Balance does not tally [R]

1-2 Errors where Trial Balance will tally [R]

2. Correcting Errors

2-2 Approach to Correction [O]

3. Impact of corrections on financial statements

3-1 Impact of Correcting Errors [R]

YouTube Video (12 Minutes)

Notes PDF - FL116

Query: Sir account payables se net profits pr change kyun nai aata?

Response: Only income and expenses affect profit. Since payables are liability i.e. neither income nor expense, these do not affect profit.

4. Comprehensive Examples

4-2 Q&A Tally Traders (ICAP Autumn 2022) [I]

4-4 Q&A Moon Mart (ICAP Spring 2022) [R]

4-5 Q&A BA Enterprises  [I]

YouTube Video (18 Minutes)

Notes PDF - FA176

Query: 15:40 sir 24500 ki purchases ka effect sirf gross profit pe ana chaiye haina? Humne net profit be bhi kyu lia? Plz batadein

Reference: Q&A BA Enterprises


Reduction in purchases (purchase expense is being credited) will decrease cost of sales.

Decrease in cost of sales would result in increase in gross profit.

Increase in gross profit will increase net profit.


Sales and cost of sales items affect both GP and NP.

Operating expenses etc. only affect NP.

4-7 Q&A Smetena's Newsagents [X]

4-8 Q&A Naltar Establishment [R]

4-9 Q&A Smart Establishment [R]

5. Objective Based Q&A

5-5 MCQs 41 to 50  [O]

YouTube Video (10 Minutes)

Notes PDF - FM058

Query: Which TWO of the following errors would cause the total of the debit column and the total of the credit column of a trial balance not to agree?

1. A cheque received from a customer was credited to cash and correctly recognised in receivables.

2. A transposition error was  made when entering a sales invoice into the sales day book.

3. A purchase of non‐current assets was omitted from the accounting records.

4. Rent received was included in the trial balance as a debit balance.


1. This means double credit recorded, no debit recorded, so trial balance would not agree

2. Invoice is written once in day book, ultimately debit and credit are overstated or understated by equal amount.

3. Complete omission. No debit, no credit, no effect on TB.

4. A credit was recorded as debit, so debit increased and credit decreased, so trial balance would not agree.

1&4 is answer.

6. Extra Practice Q&A (Previous Scheme long questions)

6-1 Q&A Sky Electronics | ICAP Spring 2018 [X]

6-2 Q&A Zeta Traders | ICAP Autumn 2019 [X]

YouTube Video (17 Minutes)

Notes PDF - FA178

Query: aoa sir, why we take provision amount as opening balance instead of unadjusted closing balance, agr c/d mana jae to debtor k closing balance per provision find krain ge or 400000 me add krin ge plz sir explain this . thankss

Response: WA. It will be same even if you assume that Rs. 400,000 is closing (but incorrect) provision and it has to be corrected to closing (but correct) Rs. 226,000 provision. However, based on amounts and percentages given in the question, it seems more appropriate to consider Rs. 400,000 as opening balance of provision.

6-3 Q&A Sibi Brothers | ICAP Spring 2019 [X]

6-4 Q&A Naltar Establishment | ICAP Spring 2020 [X]

YouTube Video (19 Minutes)

Notes PDF - FA179

Query: Why there is no impact of error related to sales day book on profit in last adjustment?

Response: In adjustment (viii), there is no error in sales figure and no adjustment is needed in it. The error was in posting to "Trade receivables" and adjustment impacts it and suspense (both not related to profit).

Query: sir policy upto 6 june tk valid hai is se pprepayment ki indication kese ho rhi hai? or ya prepaid ki indication kese ki plz explain

Response: Year end is 31 December 2019. Insurance policy is valid up to 30 June  2020. Clearly it is six months in advance.

Query: sir agr perpetual system ho to orignal entry ye hoti? inventory dr   creditor cr plz explain thanks

Response: Exactly, Inventory to be debited instead of purchases in that case.

Query: 10:42 Sir, plz is point ki entry batadein, Jab ye amount  received hui tab  bank debit kra tha ya nhi??

Response: Yes. The incorrect entry passed would have been: Debit Bank 294,000 & Credit Suspense 294,000.

Query: sir closing stock ko expense out kia hai 5800 se.lekin inventory me include hai to purchase ko dr krne k bjae  ye entry kr skte hai?

 inventory dr     creditor      cr

Response: No, that would be incorrect. Question clearly states that NE uses periodic inventory method. An FAR-I student must have knowledge of Chapter on Inventory in Introduction to Accounting.