5) Trial Balance Flashcards
TRIAL BALANCE
TRIAL BALANCE
.Produced once all of the ledger accounts have been
balanced off. At the end of the accounting period, the
(TB) lists the balances from each of the accounts from
the general ledger.
.A controlled mechanism to ensure that all transactions
processed have had a DEBIT and CREDIT ENTRY of equal
value entered into a ledger account.
.Is a check on whether it appears that all of the transactions have been correctly entered into the accounting system. The figures from the trial balance are used to produce the financial statements that have already been seen (SPL and SFP).
.It does not ensure that the data in the ledger accounts
are correct e.g. rent put in, instead of electricity.
.The trial balance does not form part of the double-entry
process, it is just a checking system.
.Lists the ending balance in each general ledger account.
.If accounts balance there should be no math errors in
the ledgers.
.Is a summary of the balances brought down on each
ledger account. Total of DEBIT BALANCES = TOTAL OF
CREDIT BALANCES.
.LOOK AT TRIAL BALANCE EXAMPLE ON LAPTOP
HOW TO TRIAL BALANCE
HOW TO TRIAL BALANCE
.A DEBIT BALANCE (DEAD) = DEBIT - EXPENSES, ASSETS &
DRAWINGS.
.A CREDIT BALANCE (CLIC) = CREDIT - CAPITAL, LIABILITIES, INCOME.
.If the balance b/d is on the DEBIT SIDE then it will be entered into the DEBIT COLUMN of the TRIAL BALANCE and if the account balance is on the CREDIT SIDE, then this will be entered into the CREDIT COLUMN of the TRIAL BALANCE.
COMPLETE TRIAL BALANCE
COMPLETE TRIAL BALANCE
.Add up DEBIT ENTRIES then add up CREDIT ENTERIES.
Both totals from each side should equal the same
amount to balance.
Errors not disclosed by a trial balance
Errors not disclosed by a trial balance
1) Omission = no debit or credit entry made
2) Original entry = incorrect amount used for debit and
credit entry.
3) Ommission = right category but incorrectly named
account.
4) Principle = wrong category of account used
5) Reversal = debit and credit entered the wrong way
around.
6) Compensating - two or more unrelated errors that
cancel out.
Suspense account
Suspense account
.When the trial balance totals disagree it is used to
temporarily balance the trial balance.
.If the bookkeeper does not know one side of an entry
therefore posts it temporarily to a suspense account.
.Opening balance on the suspense account is always
entered on the smaller side.
.Find the errors in accounts and correct them until the
the suspense account is zero.
.ALWAYS USE a SUSPENSE ACCOUNT AND A JOURNAL
TABLE to correct which were originally unbalanced so
there is a full audit trail as to why there were errors and
how they were corrected.
.LOOK ON LAPTOP FOR EXAMPLES UNIT 2
Basic journal corrections
Basic journal corrections
.If the trial balance doesn’t balance. Once the errors have
been found. it needs to be corrected this is done with
the use of a journal; we do not change the original wrong
entry in the accounts.
.Correction journal must balance with debit and credit
entry which are the same amount.
.Keep a note of all journals made; these are usually kept
in your accounts with date the journal was entered into
the accounts, journal number given as a reference,
details of the accounts to be debited and credited and
the amounts as well as a narrative to explain why the
journal is necessary.
.Look up on laptop in unit 2 for example
Reversal
Reversal
An error of Reversal is when entries are made with the correct amount, but with debits instead of credits, and vice versa.
Principle
Principle
An error of Principle is when the entries are made with the correct amount, and the correct side (debit or credit), but the wrong type of account is used.
Original Entry
Original Entry
Original Entry Error is an error caused by switching the position of two adjacent digits
Compensating
Compensating
Compensating errors are multiple unrelated errors that would individually lead to an imbalance, but together cancel each other out
Over-Cast and Under-Cast
Over-Cast and Under-Cast
The bookkeeping term for adding up a total to be more than it should be is known as over-cast and adding something up to be less than the actual total is known as
under-cast.
Omitted
Omitted
Leave out or exclude (someone or something), either intentionally or forgetfully.
