Lesson: 27

Topic: Detecting and Correcting Errors

Objectives:

During this class students will examine the following approaches to checking the entries they make to the General Journal and to the General Ledger:

• Journal Proof,
• Formal Trial Balance,
• Zero Proof

In addition, students will examine two approaches used to correct prior errors. Students will learn to correct errors using both the "reverse and re-enter" approach as well as the "error-cancellation" approach. 

Method of Instruction and Evaluation:

Complete Web Exercise-15. Please note: To clarify the concept of correcting entries, taxation is not considered within this exercise.

Expectations Addressed:

The "Fundamental Accounting Practices" strand of the BAF3M Ministry of Education Curriculum Guidelines outlines all of the following specific expectations. The expectations addressed by this lesson have been highlighted below.

• Introduction to Accounting as a Discipline:

  • explain the purpose of accounting;

  • explain the difference between accounting and bookkeeping;

  • identify the users and uses of accounting;

  • identify the Generally Accepted Accounting Principles (GAAP) and explain their importance.

• Business Structures:

  • describe the characteristics of different forms of business organization, including sole proprietorship, partnership, and corporation;

  • describe the advantages and disadvantages of different forms of business organization, including sole proprietorship, partnership, and corporation;

  • explain the differences among the equity sections of different forms of business organization, including sole proprietorship, partnership, and corporation (e.g., capital account in a sole proprietorship versus common stock in shareholders’ equity in a corporation).

• The Accounting Cycle for a Service Business:

  • assess the effects that transactions have on the accounts and financial statements of a service business;

  • record transactions using the journals and ledgers of a service business;

  • prepare a trial balance and the financial statements for a service business;

  • record adjusting and closing entries for a service business (e.g., prepaid expenses, amortization, accruals);

  • describe the impact of year-end procedures, including adjusting and closing entries, on the financial statements of a service business;

  • apply the Generally Accepted Accounting Principles (GAAP) at each stage of the accounting cycle for a service business.

References:

• Text, chapter #7; pages 216 - 222
• Understanding Correcting Entries