Transposition error definition
/What is a Transposition Error?
A transposition error is a data entry error that is caused by inadvertently switching two adjacent numbers. A clue to the presence of such an error is that the amount of the error is always evenly divisible by 9.
Example of a Transposition Error
For example, the number 63 is entered as 36, which is a difference of 27. The number 27 is evenly divisible by 9. Similarly, the number 72 is entered as 27, which is a difference of 45, which is also evenly divisible by 9.
Related AccountingTools Course
Accounting Information Systems
The Need for Transposition Error Corrections
Transposition errors must be corrected, since they will otherwise result in incorrect numbers in the financial statements that may be material. For example, when $12,000,000 is incorrectly entered as $21,000,000 for a revenue figure, the $9,000,000 difference could have a substantial impact on the income statement. Errors of this size could give the impression that a business is engaged in fraudulent financial reporting.
How to Eliminate Transposition Errors
There are several ways to eliminate transposition errors. They are as follows:
Automate data entry. Since transposition errors are caused by manual data entry, a possible solution is to use automated systems or bar code scanning to minimize the amount of manual data entry. The result should be a decline in the number of transposition errors.
Research errors. To track down transposition errors and find their causes, always conduct an investigation into each of them, find the causes, and then adjust the underlying systems to mitigate the risk that more of these errors will occur again in the future.