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Definition of 'Transposition Error'
A simple error of data entry. Transposition errors occur when two digits that are either individual or part of a larger sequence of numbers are reversed (transposed) when posting a transaction. Although this error is small and unintentional, it can result in huge financial losses or errors in some instances.
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Investopedia explains 'Transposition Error'
When two adjacent numbers are transposed, the resulting mathematical error will always be divisible by 9 (e.g. (72-27)/9 = 5). Bank tellers can use this rule to quickly find their errors in many cases. Transposition errors also occur in accounting firms, brokerages and all other areas of finance.
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