The document discusses the trial balance, which is a list of ledger account balances that is prepared after all accounting entries for a period have been recorded. It serves to check that the total debits equal total credits, ensuring the double entry system was used correctly. If the trial balance does not balance, errors must exist in the accounting records and need to be identified and corrected. While a trial balance checks for errors in posting or arithmetic, it will not detect more complex errors or those that cancel each other out.
2. The trial balance
Total debit entries = Total credit entries
If the the double entry system has been applied correctly……
For each debit entry there is a credit entry.
For each credit entry there is a debit entry.
2 Martin Quinn, 2009
3. Purpose of the trial balance
A trial balance checks that double entry system works
Used as basis for preparation of final accounts
3 Martin Quinn, 2009
4. Trial balance
Once all entries have been made correctly, total debits
should equal total credits
A list of the balances on all ledger accounts in column format
is called a trial balance
A trial balance checks that the double entry system is
working correctly and allows the preparation of final
accounts
4 Martin Quinn, 2009
6. Should the TB always balance?
Yes
If not, need to check accounts/balances for errors
6 Martin Quinn, 2009
7. Trial Balance
It does not balance ???
Arithmetic errors
Extraction errors
Posting errors
one sided entry
entered twice on same side
transposed or incorrect figures
7 Martin Quinn, 2009
8. Trial Balance
Will not show
Errors of omission – transaction left out completely
Errors of commission – correct amounts, wrong account(s)
Errors of principle – e.g. posted a capital expense as revenue expense
Compensating errors – errors which cancel each other out
Reversal of entries – wrong sides of each account used
8 Martin Quinn, 2009
