What type of error results when a transaction is incorrectly recorded on only one side of the account?

Prepare for the AAT Level 3 Financial Accounting Exam with comprehensive quizzes. Master the preparation of financial statements with detailed questions and explanations. Enhance your understanding and get set for success!

The correct answer highlights a specific type of mistake known as a commission error, which occurs when a transaction is recorded inaccurately on one side of the account. This means that one aspect of the transaction is recorded correctly, but the other is not, leading to discrepancies in the financial records. For instance, if a $100 sale is recorded as $10 in sales revenue but the corresponding accounts receivable is left unchanged, only one side of the transaction has been affected, demonstrating a commission error.

This situation contrasts with other types of errors such as omission errors, where a transaction is entirely left out of the accounts; original entry errors, where the wrong figure is used in the accounting records but typically affects both sides of the transaction; and transposition errors, which involve switching figures, such as recording $540 instead of $450, affecting the overall accuracy but not in the same manner as a commission error. Understanding the nuances of different error types helps in identifying and correcting inaccuracies in financial statements effectively.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy