Counter and non counterbalancung errors

Errors affecting both the Statement of Financial Position and Income Statement can be classified into ____.

Counterbalancing errors and Non-counterbalancing errors

What are the two classifications of errors affecting both financial statements?

Counterbalancing errors and Non-counterbalancing errors

Counterbalancing errors are errors that will ____ over two accounting periods.

Offset or be corrected

Over how many accounting periods do counterbalancing errors correct themselves?

Two periods

Which type of errors automatically correct themselves after two periods?

Counterbalancing errors

Give examples of counterbalancing errors.

Omission of deferred expense, deferred income, accrued expenses, accrued revenues, and errors affecting ending inventory

Omission of a deferred expense (prepayment under the expense method) is what type of error?

Counterbalancing error

Omission of a deferred income (precollection under the revenue method) is what type of error?

Counterbalancing error

Omission of accrued expenses is an example of what type of error?

Counterbalancing error

Omission of accrued revenues is an example of what type of error?

Counterbalancing error

An error involving sales not recorded in the first year but recorded the following year is what type of error?

Counterbalancing errorr

An error involving purchases not recorded in the first year but recorded the following year is what type of error?

Counterbalancing error

An error affecting ending inventory is classified as what type of error?

Counterbalancing error

If a sales transaction is omitted this year but recorded next year, what happens to this year's income?

Understated

If an expense is deferred but not recognized in the current year, what happens to this year's income?

Overstated

If ending inventory is overstated, what is the effect on this year’s net income?

Overstated

If ending inventory is overstated, what is the effect on next year’s net income?

Understated

When an error offsets itself over two accounting periods, it is known as a ____.

Counterbalancing error

When an error does NOT automatically correct itself over time, it is known as a ____.

Non-counterbalancing error

Give one example of a non-counterbalancing error.

Error in depreciation or asset capitalization