Trial Balance

1. Problems that might be faced when there is an error

1.1. Profit and asset valuation will be inaccurate

2. Preparation

2.1. Accounts which have the balance b/d in the debit side is said to have a debit balance and credit balance have the balance b/d in the credit side

2.2. Ledger accounts that have balance would be grouped into groups according to debit or credit columns under trial balance

3. Disadvantage

3.1. Trial balance can only ensure that the total of all debits matches the total of all credits balances. However it cannot be used to track the errors made by the accountants

4. types of error that are revealed by a trial balance

4.1. error in calculation

4.2. error in omitting either the debit or the credit enrtry

4.3. posting entries in the wrong side of the account

5. Definition

5.1. A list of ledger accounts consisting of debit and credit columns with their respective balance at a given date

6. Purpose

6.1. Check the arithmetical accuracy of the ledger account

6.2. It is commonly used to extract balances of ledger accounts and prepare the financial statement

6.3. If the trial balance agrees , it is assumed that the transactions were correctly recorded in the double entry system

7. Errors

7.1. Complete reversal of entries

7.1.1. The account is to be debited was credited and the account is to be Credited was debited

7.2. errors of commision

7.2.1. Double entry was observed but the transaction was posted to a wrong account of the same class

7.3. errors of omission

7.3.1. The transaction is totally omitted from the book

7.4. Errors of original entry

7.4.1. Transaction was correctly recorded to the double entry system but with the wrong amount

7.5. Errors of principle

7.5.1. Double entry observed but the entry is made in the wrong class of account

7.6. Compensating errors

7.6.1. Errors of the debit side have been set off by the errors on the credit side of the balances