Benefits & Limitations Of The Trial Balance Flashcards
Benefits of the trial balance
They reveal certain types of errors that have taken place as total debits won’t equal total credits
Errors revealed
Addition error: Mathematical errors when calculating balances on accounts or when calculating totals in books of prime entry
Partial Omission: An item has only been entered once (as a debit or credit)
Transposition: Amounts posted with numbers the wrong way around
Unequal posting: Different amounts have been debited and credited causing debit and credit totals to be different
Limitations of the trial balance
Certain errors won’t be revealed in a trial balance
Errors revealed
Error of Omission: Transactions are completely omitted from accounting records
Complete reversal: Correct amounts have been recorded on the wrong side of both T accounts
Error of original entry: The wrong amount is posted to the right type of account
Compensating errors: Two errors cancel each other out
Addition error definition
Calculation errors are found when calculating balances on accounts/books of prime entry
Debit and credit totals are incorrect at the trial balance
Partial omission error definition
An item has only been entered once (as a debit/credit)
Transposition error definition
A common accounting error as result of human error.
Caused by substituting two or more sequential digits
Book keepers entering data
Unequal posting error definition
Different amounts have been debited/credited (usually one side of the double entry was wrongly posted)
Error of omission definition
Transaction is completely omitted from accounting records
Complete reversal error definition
Amounts have been recorded on the wrong side of both T accounts
Error of original entry definition
The wrong amount is posted to the right type of account
Compensating errors definition
Two errors cancel each other out
