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Jayesh Gupta
Jayesh GuptaCurious
In: 1. Financial Accounting > Ledger & Trial Balance

Which errors are revealed by trial balance?

Which errors are revealed by trial balance?
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    1. GautamSaxena Curious .
      2022-07-18T20:24:52+00:00Added an answer on July 18, 2022 at 8:24 pm
      This answer was edited.

      Errors revealed by Trial Balance

      Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit.

      It is primarily used to identify the balance of debits and credits entries from the transactions recorded in the general ledger in a certain accounting period. The debit and credit sides total are equal in a trial balance.

      Classification of errors in the trial balance

      • Errors of Commission: Errors arising due to wrong posting of a journal entry, a ledger account, wrong totaling of a subsidiary book, or even wrong recording of accounts. Therefore, resulting in trial balance error. E.g business receives an amount on goods sold on credit but it is instead posted to additional capital a/c.
      • Errors of Omission: This occurs when some transactions are fully or partially omitted from books of accounts. A complete omission is a case when the transaction is completely omitted but a partial omission is seen when the transaction is entered in the journal but not posted to the ledger. E.g a cheque worth $4,100 was received from ABC Ltd. but completely omitted. Then the rectification entry shall be passed later on.
      • Compensating Errors: It occurs when the errors are equal in amount and opposite to each other so and so that they cancel each other which further creates no difference in the Trial Balance. E.g Harry’s account is debited to $300 wrongly instead of $400. On the other hand, Liam’s account is credited by $700 instead of $800.
      • Errors of Principles: These are the errors occurring when the entries that are posted are incorrect, violating the accounting policy. E.g when receiving money from debtor then debiting debtor and crediting the amount of money received.

      Some of the common errors

      Some more (commonly seen) errors while preparation of the trial balance:

      Errors of Commission

      1. Addition or totaling mistakes in the trial balance, debit, and credit side.
      2. Wrong totaling of subsidiary books.
      3. Error in the sum total of subsidiary book.
      4. Posting in the wrong account.
      5. Recording a transaction incorrectly in a journal.
      6. Balance wrote on the wrong side of the trial balance.
      7. Error in posting a journal to a ledger.
      8. Posting on the wrong side of the account.

      Errors of Omission

      1. Goods purchased and returned to the supplier may be entered in the purchase returns book but not posted in the debit of the supplier account.
      2. Cash paid to creditors was completely omitted from the recording.

      Compensating Errors

      • Wrong posting of the same amount in another account, which may not be affecting the equalizing of trial balance.

      Errors of Principles

      1. Posting twice to a ledger account.
      2. Balance c/d or balance b/d is written on the wrong side of the ledger account.
      3. Reversal of a journal entry by mistake like, crediting cash and debiting debtor’s a/c.

       

       

       

       

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