Trial Balance

Error of omission

A transaction has been been completely left out from bookkeeping meaning that no record was made and the trial balance will still balance

Error of principle

A transaction is recorded in the wrong type of account.For example, recording the purchase of a vehicle(assets) into the motor expenses account (Expense)

Error of commission

Correct Amount is posted to the correct type of account but the wrong account was used. for example, Posting a credit sale to B smith(Debtors) instead of D smith(Debtors.

Reversal of Entries

Correct amount recorded at the wrong side of the T account. for example, posting revenue on the debit side instead the credit.

Six errors that have an equivalent affect on both debit and credit totals on the trial balance

Error of omission Error of commission Error of principle Compensating errors Reversal of entries Error of original entry

Advantages of producing trial balance

Helps to identify key accounting information such as totals of key accounting data. e.g. money in the bank, purchases etc.

Advantages of producing trial balance

Helps to prepare the final accounts- income statements and balance sheet.

Advantages of producing trial balance

Helps to reveal errors.

Error of original entry

Incorrect amount entered on the source document. for example, if £50 was recorded in the purchase invoice rather than £500.

Compensating errors

Mistakes of equal value on both sides of the T accounts which will still make the Trial balance add up and balance

Advantages of producing trial balance

To check the arithmetical accuracy of the bookkeeping. if the total of Debits and credits are equal then we can be fairly confident of accuracy.

Disadvantages of producing trial balance

Trial balance cannot guarantee 100% accuracy of the bookkeeping.