Quick Answer
An error account is a separate account used to record and control a trading error while the firm addresses it. A trading error may arise from handling, execution, reporting, or correction of a transaction. Separating the error supports control while the underlying transaction issue is resolved.
An error account keeps an unresolved trading error distinct from ordinary transaction activity.
Recording and Controlling Errors
- An error account records and controls a trading error separately while the error is addressed.
- A trading error can arise in the handling, execution, reporting, or correction of a transaction.
- The control sequence is: identify the error → record it separately → address the transaction issue.
Think of it this way: The error account is a clearly marked holding area. It keeps the error visible and separate while the firm works through what happened.
Exam Tip: Gotchas
- The error account does not describe the source of the mistake. The trading error may originate in handling, execution, reporting, or correction.
- Its defining purpose is separate recording and control while the error is being addressed.