Errors disclosed by Trial Balance and Errors not disclosed by Trial Balance

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Preparation of Trial Balance

Trial balance is prepared to check arithmetical accuracy of debit and credit balance.

If there is any error, it is rectified with journal entries.

Trial balance can be prepared at any time.

Generally, it is prepared at the end of every month.

But it can be prepared quarterly or half yearly.

It is compulsorily prepared at the close of every accounting period to verify the arithmetical accuracy of the ledger accounts.

 

(A) Errors shown (disclosed) by trial balance

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country  

When errors affect the agreement of trial balance, it is called errors shown by trial balance.

The main errors are as follows:

Partial omission

When transaction recorded in journal entry but not posted in ledger is known partial omission.

Forget to carry forward is also partial omission.

Such error effects total of trial balance.

 

Wrong posting

When transaction amount is recorded more or less than actual, it is known wrong posting.

Suppose $/₹/Rs 50,000 received from Laxmi is recorded Rs 5,000.

Here Rs 45,000 (50,000 ̶  5,000) is less recorded.

Such error effects total of trial balance.

 

Posting on wrong side

When transaction is recorded correct in journal entry but posted in wrong side of ledger, it is known wrong posting.

Suppose, goods sold to Usha is $/₹/Rs 20,000.

It must be debited in Usha’s account but posted in credit side.

Such error effects total of trial balance.

 

Wrong total or balance

When subsidiary book is wrong totalled or balance of ledger is wrong, it is known wrong total or balance.

Such error effects total of trial balance.

 

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(B) Errors not shown (not disclosed) by trial balance

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country  

When errors do not affect the agreement of trial balance, it is called errors not shown by trial balance.

The main errors are as follows:

Complete omission

When transaction is not recorded in journal entry or not posting into ledger, it is known complete omission.

Suppose salary paid $/₹/Rs 50,000 not recorded in journal entry.

Such error does not affect total of trial balance.

 

Wrong entry in subsidiary book

When wrong entry is made in subsidiary book, it does not affect total of trial balance.

Suppose goods sold to EP Traders $/₹/Rs 54,000 is recorded as Rs 45,000.

 

Enter in wrong account

When amount of one’s account enter to another account, it is known enter in wrong account.

Suppose cash paid to Shankar Rs 35,000 is recorded as Shanker.

Such error does not affect total of trial balance.

 

Compensating errors

When one transaction is under-casted but other transaction is over-casted by same amount, it is known compensating error.

Suppose rent paid is under charged $/₹/Rs 5,000 but insurance paid is overcharged by $/₹/Rs 5,000.

Such error does not affect total of trial balance.

 

Errors of duplication

When transaction is written correct but recorded in twice (two times), it is known error of duplication.

Suppose wages paid $/₹/Rs 15,000 is recorded twice.

Such error does not affect total of trial balance.

 

(C) Causes for disagreement of trial balance

The main causes for disagreement of trial balance are as follows:

(a) Double posting of a transaction from journal to ledger.

(b) Wrong posting or omission of posting one aspect of a transaction in ledger.

(c) Wrong entry or omission of entry in journal but correct posting in the ledger.

(d) Posting a transaction on the wrong side of an account.

(e) Error in casting special journals.

(f) Error in balancing a ledger account.

(g) Error or omission in transferring a ledger account balance in trial balance.

(h) Casting error of trial balance.

(i) Recording a ledger account balance twice in trial balance.

 

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