Whatever the stage at which the error is committed, it may be either an error of principle or an-error of clerical nature.

All errors can therefore be. broadly divided into

a) The errors of principle, and

b) The clerical errors.

The clerical errors can be further divided into

i. Errors of omission,

ii. Errors of commission, and

iii. Compensating errors.

Errors Of Principle: When a transaction has not been recorded as per the rules of debit and credit, or it violates some other principle, the errors so arising are called 'errors of principle'. Examples of such errors are:

A credit purchase of fixed assets recorded in the Purchases Journal instead of the Journal Proper. This results in debiting the Purchases Account instead of the concerned fixed asset account. This is an error of principle because it amounts to treating an expenditure of capital nature as a revenue expenditure.

Errors of Omission: When a transaction is completely or partially omitted to be recorded in books of account, it is called an 'error of omission. If the transaction is not recorded in the subsidiary books or its posting is completely omitted, it is called an 'error complete omission’.

If, however, the posting is done in one account but omitted from the other, it is called an 'error of partial omission'.

For example, if a credit purchase of goods from Shyam is not recorded in the Purchases Journal or a credit purchase of furniture from Ram is recorded in the Journal Proper but no posting is done in any of the two accounts involved, then these will be termed as errors of complete omission.

Errors of Commission: When an error is committed in recording a transaction with wrong amount, or posting it to a wrong account or the wrong side of an account, it is called an 'error of commission’.

For example, a credit sale of Rs. 720 is recorded in the Sales Journal as Rs. 270, or it is posted to the debit of C's Account instead of B’s Amount or it is posted on the credit side of B's Account. Errors like double posting, wrong totaling, wrong carry forward, wrong balancing etc. are also regarded as errors of commission.

Compensation Errors: Those errors which nullify the effect of each other are called 'compensating errors'. In other words, compensating errors refer to such a group of errors wherein the effect of one error is compensated by the effect of other error or errors.

For example, while posting an entry of Rs. 200 to the debit of Ram’s Account we wrongly wrote Rs. 400. Then, while posting an entry of Rs. 500 to the debit of some other account we wrote Rs. 300. The first error led to a higher debit of Rs. 200 whereas the second error resulted in a lower debit of Rs. 200. Thus, the effect of the first error is nullified by the effect of the second error.