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The Trial Balance & Errors

7 May, 2015 - 16:41

The trial balance is a list of accounts with their debit or credit balances. It is usually prepared at the end of an accounting period. The advantages of using a trial balance are: 

  1. it reveals mathematical errors since total debits must equal total credits, and 
  2. it assists in the preparation of financial statements. It should be noted, however, that trial balances cannot detect every type of error.

The first step in preparing a trial balance is to calculate the balance of each of the accounts in the general ledger. Some of the errors that the trial balance will not reveal are for instance: 

  • journalizing a transaction twice, 
  • forgetting to record a transaction, 
  • entering an erroneous but identical amount in debit and credit, 
  • posting part of a transaction as a debit or credit to the wrong account.

Errors that cause the trial balance not to balance are 

  • the beginning amount of an account was incorrectly recorded, 
  • a debit entry was posted as a credit entry, 
  • a debit or credit balance was omitted, 
  • a digit in a number was moved one or more spaces (known as slide). 

Determining the amount of the difference between debit and credit can help to look for such amount. For instance, when a debit and a credit were interchanged, the trial balance difference will be twice this amount.

A major function of an auditor is to find accounting errors.

What can be done if a trial balance does not prove? 

The following steps can generally help discover errors more quickly! 

  1. Add columns once more and determine the difference. 
  2. Check if the error could be a transposition, slide, or mathematical error.
  3. Compare the balances of the ledger with those of the trial balance. 
  4. Recompute each ledger account balance. 
  5. Check all postings in the ledger by referring back to the journal.
  6. When an error is found, (or part of it) add again all debits and credits to check is they are now equal.