When checking results is imperative that you ensure calculations are accurate and meet required outcomes. Recognising and correcting common computational errors where required can assist with checking calculations and record results. Common computational errors may include:
- Input/transcription errors
- Wrong spreadsheet function or formula used
- Wrong computational sign
- Incorrect order of operations
- oss of constants
- Incorrect positioning of decimal points and brackets in equations
Input/transcription errors
A transcription error is a type of data entry error commonly made by human operators or by optical character recognition (OCR) programs. Human transcription errors are usually the result of typographical mistakes caused by striking the wrong key on a keyboard or by striking two or more wrong keys because of finger misalignment to the keyboard. Electronic transcription errors result from attempts to scan printed matter that has been compromised or rendered in an unusual font.
Some transcription errors can be identified using spell-checking programs. However, many transcription errors, particularly numeric data, it is difficult or impossible to determine. Transcription errors are an annoyance for authors and editors and have been for decades. Unfortunately, this problem is increasing and getting worse, as more printed material is being transcribed into digital format for use in computers.
Wrong spreadsheet or formula used
To calculate new values, analyse data, and much more, you use formulas. However, formulas also have a downside: If you make even a small mistake when typing a formula, it can give an incorrect result.
A spreadsheet might not always tell you if the formula is wrong or inaccurate. It will frequently just go ahead and run the calculations and give you the wrong answer. This is why it is so important to double-check your formulas whenever you create them.
There are some tips you can use to help check spreadsheets and formulas for accuracy. These tips should provide you with some tools to identify many common errors, even if they won't help you solve every problem you encounter.
- Check the references
- Look for mix-ups
- Break it up into several smaller formulas
- Check the arguments
- Estimate
- Walkthrough the order of operations.
Wrong computational signs
Computation is a calculation involving numbers or quantities. Act, process, or method of computing and calculation.
Incorrect order of operation
"Operations" relates to addition, subtraction, multiply, divide, etc. It is helpful to remember that it is most likely an operation if it isn't a number.
So, when you see something like 7 + (6 × 
+ 3), what part should you calculate first?
Start at the left and go to the right? Or go from right to left?
Calculate them in the wrong order, and you will get a wrong answer! So, long ago, people agreed to follow the rules when doing calculations; these are referred to as the ‘order of operations’ or BODMAS. These rules are outlined following:
- Do things in Parentheses first
- (Powers, Roots) Before Multiply, Divide, Add or Subtract
- Multiply or Divide, before you Add or Subtract
- Otherwise, just go right to left
Correct order using BODMAS
7 + (6 x + 3)
= 7 + (6 x 25 + 3)
= 7 + 150 + 3
= 160
Incorrect order (left to right)
7 + (6 x + 3)
= 7 + 6 x 25 + 3
= 13 x 25 + 3
= 328
Loss of constants
A constant, in Algebra, is a number on its own, or sometimes a letter (a, b or c) to stand for a fixed number. A fixed value.
- Coefficient
- Variable
- Constant
- Operator
- Constant
If it is not a constant, it is called a variable.
A constant is a real number that is “significantly interesting in some way”. Constants arise in various areas of mathematics, with constants such as e and π occurring in diverse contexts as calculus, number theory, and geometry.
Some mathematical constants are more notable for historical reasons than for their intrinsic mathematical interest. The more popular constants have been studied all the way through time and calculated to various decimal places. Constants, in mathematics, are defined numbers, and usually, they are also computable numbers.
Incorrect positioning of the decimal place
The positioning of numbers, decimal points and brackets in equations are vital for correct calculation.
- Tens
- Units
- Decimal point
- Tenths
- Hundredths
- Thousandths
Our decimal system lets us write numbers as large or as small as we want, using the decimal point. Digits can be placed to the left or right of a decimal point to show values greater than one or less than one.
The decimal point is the most important part of a Decimal Number. Without it, we are lost and don't know what each position means.
Ways to prevent business calculation errors
Business calculations are used to inform reports and drive good decision-making. If a report is incorrect, then it is practically impossible to end up with the best decision, so it is vital to avoid errors.
Some ways to ensure the integrity of data and prevent calculation errors are:
- Train staff on data entry accuracy.
- Set company policy on documentation procedures so entries can be made properly and accurately.
- Put practices in place that can help to detect and correct accounting errors, for example, “reasonability” checks to identify errors.
- Keep your formulas simple. Breaking the calculation into easily recognisable steps helps identify errors.
- Save versions and ensure you are using the correct version of documents.
- Reconcile your results to the source of truth. Generally, the data in your spreadsheet comes from one or two sources; always monitor the spreadsheet to see if it diverges from the source of truth.
Organisations have written policies and procedures that ensure documents and records are appropriately created, captured, accessed, managed, and stored in a manner that reflects the business, corporate and regulatory compliance requirements. Policies and procedures should be reviewed and improved over time and altered and updated as an organisation and its needs evolve.
It is important that you record the results of all financial calculations according to your organisations record management procedures.
Record management ranges from simple manila folder filing systems to complex on-line electronic systems. Whether simple or complex, a record keeping system should be easy to use and provide adequate storage and retrieval of records. Most importantly, the record keeping system should be suited to the business needs.
Organisational policy and procedures relating to record-keeping and filing can include:
- Records management
- Document management
- Security access
- Filing protocols
- Processes for recording transactions
- Processes for classifying transactions
- Internal sources of data
- External sources of data
- Legal obligations
- Operations manuals
- Manual or computer system documentation
ASIC record keeping requirements
All businesses must keep financial records and calculations to ensure they recognise how their processes perform and for auditing and tax purposes. Some companies need to keep these records to assist with preparing and lodging financial reports with the Australian Securities and Investments Commission (ASIC).
ASIC is Australia’s corporate, markets and financial services regulator.
Financial reports prepared under the Corporations Act generally must comply with the accounting standards. Australian Accounting Standards meet the International Financial Reporting Standards (IFRS) requirements as Australia adopted IFRS in 2005, with an application for financial periods beginning on or after 1 January 2005.
Click Here for more information on ASIC’s record keeping requirements.
ATO record keeping requirements
Many small business owners handle their day-to-day book-keeping requirements themselves but consult an accountant for help with formal reporting functions. Regardless of whether businesses choose to manage their finances internally or outsource the process, they need to understand and comply with the ATO’s record-keeping rules. Businesses are legally required to keep records of:
- any documents related to their business’s income and expenses
- any documents containing details of any election, choice, estimate, determination or calculation you make for your business's tax and super affairs, including how (basis or method) the estimate, determination or calculation was made.
If you claim a deduction, you must have records to show how you work out your claims. Records are usually a receipt from the supplier of the goods or services. A receipt must show the:
- name of the supplier
- amount of the expense
- nature of the goods or services
- date the expense was paid
- date of the document.
Records must be in English or able to be easily converted to English and you must keep most records for five (5) years.
There can be legal and financial consequences if a business does not comply with these record-keeping requirements. If your files are kept on a computer by a third party, such as your accountant’s computer, a hard copy must be provided to a person entitled to inspect the records.
Click Here for more information on the ATO’s record keeping requirements.
