When a transaction has been recorded but has been wrongly entered in the books of original entry or in the ledger, error of commission is said to have been made, e.g., incorrect entries in the original records, wrong castings, calculations, extensions, carry forwards etc. Some of such entries will be detected by the non-agreement of the trail balance.
On the other hand, if a mistake has been committed in the invoice for the sale of goods, the error will not be detected as the mistake will appear both in the original books as well as in the ledger.
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- Last-in, First-out (LIFO)
Last-in, First-out (LIFO) method is an inventory costing method that assumes the costs of the latest units purchased are the first to be allocated to cost of goods sold.
- Compensating error
A compensating error is one which counter-balanced by any other error or errors, e.g., if A’s account was to be debited for Rs. 10
- Direct method
Direct method is a method of determining net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis.
- Internal process perspective
Internal process perspective is a viewpoint employed in the balanced scorecard to evaluate the effectiveness and efficiency of a company’s value chain...
- Overhead controllable variance
Overhead controllable variance is the difference between normal capacity hours and standard hours allowed times the fixed overhead rate.
- Customer perspective
Customer perspective is a viewpoint employed in the balanced scorecard to evaluate the company form the perspective of those people who buy and use its products or services.
- Production budget
Production budget is a projection of the units that must be produced to meet anticipated sales. Production requirements are determined form the following formula.