Errors in Trial Balance

Presented by MOHIT JAIN (53)

WHAT IS TRIAL BALANCE

A Trial Balance is a list of accounts and their current balances at a given date. It is usually prepared on the last day of the accounting period and the list of account balances are arranged according to debit and credit balances.

ERRORS IN TRIAL BALANCE

Errors can be classified into 2 categories: 1.Errors not revealed by the Trial Balance: The errors which do not affect the equality of the trial balance total. 2. Errors revealed by the Trial Balance: The errors which cause the trial balance total to be in disagreement.

ERRORS NOT REVEALED BY TRIAL BALANCE

Errors of omission: A transaction is omitted completely from the books so that there is no debit and credit entry of the transaction, e.g. Drawings of 50 by the proprietor was not recorded. Errors of commission: An entry is posted to the correct side of the ledger but to the wrong account, e.g. Payment of 100 by a customer A. John was wrongly posted to the account of another customer, B. Johan.

ERRORS NOT REVEALED BY TRIAL BALANCE

Complete Reversal of Entries: An account that should be debited is credited and vice versa, e.g. A cheque 200 received from ram was debited to the account of ram and credited to the Bank Account.

ERRORS REVEALED BY TRIAL BALANCE

Errors in Calculation: If there is any miscalculation of the Trial Balance totals or the net account balances, the Trial Balance will not balance, e.g. There was an error in the calculation of the cash balance, causing the Trial Balance totals not to balance too. Errors in Omission of One Entry: Omission of either the debit or credit entry of a transaction will cause the totals of the Trial Balance not to agree, e.g. A cheque 500 received for commission was debited to the Bank Account only.

ERRORS REVEALED BY TRIAL BALANCE

Posting to the Wrong Side of An Account: Entry into the wrong side of an account will cause one side of the ledger to be more than the other, e.g. A cheque of 800 paid to creditor, Mohan was credited instead of debited to his account. Errors in Amount: If the debit entry of a transaction differs in amount with the credit entry, the Trial Balance will not balance, e.g. Cash 134 received from Caine was debited to the Cash Account as 134 and credited to the account of Caine as 143.

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