25
10
2007
Trial Balance–Its Limitation:Errors That Can Be Revealed By The Trial Balance (Part1 of 2)
Posted by: slang in k. Trial Balance
A Trial Balance that balances DOES not necessarily prove that all the transactions have been recorded or that the accounting process is error-free.
Numerous errors or mistakes can exist even though the trial balance totals are in agreement. This can be categorized in two parts namely:
- Errors that CAN BE REVEALED by the Trial Balance and (Part1)
- Errors that CANNOT BE REVEALED by the Trial Balance(Part2)
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Errors That CAN BE REVEALED by the Trial Balance are: |
| (A) ERRORS IN CALCULATION |
· this is caused by any miscalculation of the trial balance totals or · the net account balances but the Trial Balance will not balance – for example an error in the calculation of the cash balance, causing the trial balance totals not to balance. |
| (B) ERRORS OF OMMISSION OF ONE ENTRY |
| · Omission of either the debit or credit entry of a transaction will cause the total of the Trial Balance not to agree for example a cheque of $1,500 received for services rendered was ONLY debited to the Bank Account and the omission to post the credit entry ( sales) |
| © POSTING TO THE WRONG SIDE OF AN ACCOUNT |
| · Entry into the wrong side of an account will cause one side of the ledger to total more than the other for example a cheque of $1,000 paid to Mr A was credited instead of debited to his account. |
| (F) ERRORS IN AMOUNT |
| · If the debit entry of a transaction differs in amount with the credit ery, the Trial Balance will not balance for example -cash $2,340 received from Mr. A was debited to the Cash Account as $2,340 and credited to the account of Mr A as $2,304 |
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